UK Wholesale Dairy Prices Come Up Slightly Stronger, but product sentiments are Bearish

Milk powder

Cow Milk Butter

Published Jul 18, 2023

The UK dairy commodity market saw stable to marginal gains in June, with bulk cream, unsalted butter, and mild cheddar prices rising by 9%, 2%, and staying flat respectively. However, the market sentiment is bearish to stable, and the YoY comparison shows significant losses. The focus going forward is on how grass growth in the UK will evolve, as current rates are below average and could dampen milk collections. Dairy farmers are advised to top their paddocks to help advance the progress of grass growth.

In June, indicative average prices for bulk cream, butter, skimmed milk powder (SMP) and mild cheddar saw strong gains. However, sentiments in the product market are bearish to stable. This should give an indication of the direction of the dairy commodity prices after the spring flush, all else equal. The focus going forward nonetheless would be to be on how grass growth in the United Kingdom (UK) would evolve.

The UK bulk cream wholesale average price was unstable over the month on the back of unpredictable supplies and buyers who couldn’t make up their minds in time to buy cream from the UK. Weekly collections available for cream production have dropped slightly over the month as well but a lull demand market as Europe begins to go on holiday, stopping prices from going up strongly. The price thus rose by 9% MoM to £1622 per metric ton (mt) in June.

From May, the unsalted butter average price also rose by 2% to £3990/mt in June. Similar sentiments to bulk cream are driving butter but the holiday season is eating into buyer interest, so demand has been nowhere near dominant so far, even though production has weakened.

SMP also came up short of MoM albeit marginally. It fell 1% from the previous month to £2060/mt in June. Demand for dry products has also been low as most short-term needs by consumers have been already met while production is stable.

Mild cheddar was the product that bucked the gains momentum. Sentiments are bearish and stayed flat at £3560/mt.

Dairy commodity products have showed stable to marginal gains over the month but their indicative prices looking at the year-ago prices have made significant losses. Bulk cream is down 41% from its price in Jun-22, followed by SMP and butter which are down by 39% and 34% YoY respectively. Milk cheddar ends the pack down 25% YoY. The YoY comparison reflects the true market positions currently.

Although bearish sentiments exist in the market currently, prices have firmed. The price trajectory is however in line with the seasonal trend-normally at this time of year, when milk collections edge down, it increases the upside risk of dairy commodity prices.

Current grass growth rates at dairy farms are below the average levels so it is expected to dampen milk collections and farmers resorting to feed wheat which would consequently squeeze farm profitability. However, the advice to dairy farmers is to top their paddocks, which would help retune residuals and help advance the progress of grass growth.