Projected farmgate milk price changes
Updated 23 December 2021
These projections indicate the expected movements in farmgate milk prices for the next three months, based on movements in the dairy markets.
- Continued price increases for both butter and SMP saw AMPE increase 6% in November to reach 44.7ppl.
- MCVE also moved up on higher prices for both mild Cheddar and whey. This resulted in an increase in MCVE of 1.8ppl (5%) on last month.
- The increases to both AMPE and MCVE have come despite an increase in processing costs from December of around 0.5ppl for both indicators.
- The net impact of these movements on the overall market value of milk (MMV) was an increase of 1.9ppl.
- The latest movements suggest potential for increases to market-related farmgate prices in the coming month.
- The projected change is based on the strong link found between movements in the value returned to manufacturers from the market (MMV) and movements in farmgate milk prices.
- On average, it was found that a 1ppl change in the MMV will lead to around a 0.5ppl change in the overall GB average milk price, generally three months’ later.
- Differences will arise due to the markets in which milk buyers operate as well as the mechanism they use to set the milk price. These will impact the timing of price movements as well as the size of the change.
- Other factors which are likely to impact milk prices will be the degree of competition for milk in the market, changes to available processing capacity, import competition and contract negotiations.
-  The Milk Market Value (MMV) is a weighted average of AMPE and MCVE on a 20:80 basis. This was found to be the best predictor of movements in farmgate prices based on historical data. The analysis was done excluding prices paid on retailer-aligned contracts. The impact of the adjustment of AMPE and MCVE following the 2020 review has been accounted for, and the model updated.
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