DairyCo

Cream Income to a Liquid Processor

Published 27 January 12

Cream Income to Liquid Milk Processors   

• The price of bulk cream decreased between December and January, by £220/tonne (15.2%) to £1,230/tonne.
• The estimated cream income to a liquid processor decreased, by 1.27ppl (15.2%) to 7.08ppl in January; 1.04ppl (12.8%) lower than the 8.12ppl achieved in January 2011.

For further information on wholesale prices please click here. 

The price below indicates the trend in incomes, rather than an absolute value. The actual income effect and a precise increase in ppl will be difficult to obtain as this requires knowledge, on a daily or monthly basis, of the following:

• Butterfat levels (which will tend to vary and be higher over the winter period).
• Exact prices for bulk cream.
• An exact breakdown of what product they are producing (i.e. whole, skimmed, semi-skimmed etc.).
• The amount of cream wasted in the manufacturing process. 

For historical information on cream income please see Cream Income Sheet. 

All liquid processors generate surplus cream as little liquid milk is now sold as whole milk. This surplus cream has a value with some sold to supermarkets in small pots and some sold in bulk, to be manufactured into other products.

From April 2010, the calculation of the cream income to liquid milk processors has been refined by taking into account the new retail category of low fat milk. Figures before and after that date are therefore not directly comparable but this change has a minor impact on the price quoted.

Below is an outline of the trend in cream prices in terms of pence per litre for liquid milk processors.

Outline of how cream income is calculated 

• The bulk cream wholesale price is based on a spot price for export of cream at 40% butterfat. It may not reflect the domestic spot price or price received for cream sold under contract.

• Prices have been compiled by talking to dairy product sellers, traders and buyers.  Views were taken for the period 1 January through to 26 January. 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.

• The cream income to a liquid processor is based on the excess cream between the rolling butterfat average for a particular year (previous 12 months) and the average level of fat in liquid milk sold through the retail market (supermarkets, local stores and doorstep) for that particular year.
• The value of the excess butterfat is then calculated on the basis of a litre of cream at 40%.
• Calculation excludes any estimation of wastage in the manufacturing process.

The weighted average level of fat (whole, skimmed, low-fat and semi-skimmed) in retail liquid milk is calculated based on Kantar retail liquid data.