DairyCo

• The average price at the July auction was 19.54ppl, 0.71ppl higher than June.
• 37 million litres were sold at the July auction.

United Dairy Farmers milk auction this month sold milk only on one month contracts, for delivery in August. A total of 37 million litres of milk were sold at an average price of 19.54ppl, some 0.71ppl higher than last month's auction (18.53ppl). Prices of a year ago were significantly higher at 26.50ppl on average across all contracts sold, when markets were more buoyant.

The improvement in the auction price this month comes amidst a combination of conflicting factors. WMP prices on world markets eased back in July and the Fonterra WMP auction price this month also fell, heralding a potentially weaker market later in 2009 for exporters of WMP. On the other hand, greater certainty has been introduced into the main internal EU commodity markets with proposals to keep intervention open for butter and SMP through the winter period of 2009/10. Effectively, this provides the market with price support at least until the summer of next year and potentially reduces the need for commodity manufacturers to look at other market outlets (such as WMP).

Another helpful factor is a change in the trend in currency this month. After three months of a recovery in Sterling's value against the Euro, which reduced the competitive position of UK manufacturers against other EU manufacturers, Sterling weakened slightly against the Euro in July. And finally, there has been less milk available for auction in Northern Ireland this month as milk supplies decline seasonally and this is usually a beneficial factor in milk price auctions.