Whilst UK milk production in May was still down year on year, the 2.6% decline was at least less than the 5.3% drop in April. The relative position is believed to have improved further in June but manufacturers are still complaining that there is insufficient milk being produced to exploit all the market opportunities that currently exist. Some of these opportunities exist in export markets because the weakness of Sterling so far this year has made export markets more attractive. Competition for the available milk is keeping UK milk prices very firm or slightly higher over the past month. This is in sharp contrast with Ireland and Continental countries where milk prices have now been falling for several consecutive months.

UK butter and cream prices have edged higher over the past month, both because of the tight UK supply and as a reflection of the firmer Continental market. Butter prices have increased 3.4% between May and June, an increase of £75/tonne to £2,300/tonne, this is the same value as in June 2007. Export cream prices have been very variable due to the onset of the fresh fruit season and because shipments to the Continent have been met with disruption from industrial action. Bulk cream has therefore risen £27/tonne between May and June 2008, an increase of 2.8% to £1,007/tonne. However, this is 12.4% below the level seen a year ago, when the bulk cream price was £1,150/tonne.

SMP prices have firmed slightly increasing £20/tonne - 1.0% to £2,120/tonne, making the price just 1.4% (£30/tonne) below its level in June 2007 of £2,150/tonne. The Cheddar market is also quite firm with prices staying the same as May 2008, mild cheddar at £2,850/tonne and mature cheddar at £3,300/tonne. Mild cheddar has not moved in value since November 2007, but is still £600/tonne above the price in June 2007. Mature cheddar has not seen a price change since September 2007, when the price was £3,100/tonne. However, mature cheddar is £900/tonne - 37.5% more than in June 2007 when it was £2,400/tonne.

Notes: The bulk cream wholesale price is based on the spot price for cream at 40% butterfat, for export. Butter and cheese prices are also based on spot prices and relate to larger quantities of a container or more on a delivered price basis. Larger contracts may be made on a lower price basis. The SMP price is based on spot and longer term contract prices. Prices were derived from talking to traders and milk processors during the period 18-20 June. The published prices will not necessarily match the actual price received by a milk processor as this will depend, amongst other things, on the proportion of product that is sold on the spot market and the proportion sold under longer term contracts and at what price this is done.