AMPE 2000

Published 27 June 14

UK Actual Milk Price Equivalent (AMPE) 2000

In recent years, DairyCo has noted how some processing costs (notably energy) have increased which may mean the indicators are no longer accurate. DairyCo, therefore, decided to instigate an independent review of the method of calculation. The review aimed to establish how UK processor costs and yields have changed and can be downloaded here.

AHDB/DairyCo publish market indicators for the dairy sector to provide broad, general estimates of market returns. The value of market indicators is as a basis for identifying trends and to use them for more precise purposes goes beyond the limits of their scope and accuracy.

Current Monthly Values

  • An increase in wholesale butter prices (up £100/tonne to £2,875/tonne) and an increase of £50/tonne in the SMP price to £2,400/tonne over the month has led to AMPE 2000 rising by 1.0ppl (3.1%) in June to 32.1ppl.

  • IMPE decreased by 0.3ppl to 17.2ppl* in June 2014 due to changes in the Sterling/Euro exchange rate.
  • For further information on UK wholesale prices please click here.

(ppl)

June 2014

1 Month Before

12 Months previously

AMPE 2000

32.1

31.1

38.8

IMPE

17.2*

17.5

18.4

* The value shown for IMPE is calculated using the average exchange rate for 1-27 June

 

Note: ppl change and percentage difference may differ due to rounding

Comparison of AMPE with IMPE

The graph below shows movements of the IMPE and the AMPE from 2003 to 2014.

 AMPE v IMPE

 

The AMPE measures market prices for butter and SMP. These market prices are often affected by changes in currency and the AMPE frequently tracks trend movements in the IMPE. The graph above shows two periods - the second halves of 2004 and 2005 - when market prices did not follow support price cuts under the Mid-Term Review until some six or so months after the cuts took place. On both occasions, there was a fine balance of supply and demand especially for SMP, and market prices only fell when supplies outstripped demand at the start and end of 2005.

During 2006, the AMPE parted company significantly with the IMPE. The SMP market remained in a fine balance of supply and demand with no stocks in intervention available to balance market shortfalls: this led to rises in market prices in the second half of the year. A shortfall of supplies to meet world demand in the spring and summer of 2007 caused market prices for butter and SMP to rise strongly to unprecedented levels.

The fine balance of supply and demand changed in late 2007 and prices fell from the autumn of that year until the late summer of 2009 when a spike in prices occurred in dairy commodity markets. This recurred in the spring of 2010 and the higher prices were maintained in 2011 until the autumn.  Moving into the early part of 2012, there is likely to be some further easing although the length of this is uncertain with some commentators suggesting that prices will stabilise at higher levels than in previous years.

The delay in the fall in market prices in relation to intervention prices in 2004 and 2005 resulted in significant premiums opening up for the AMPE over the IMPE at these times. During 2007 and 2008, there were extraordinarily high premiums for the AMPE over the IMPE at times when market prices soared to unprecedented levels.

Falling market prices and rising values for the IMPE resulted in the IMPE and the AMPE coming much closer together for much of 2009, with the IMPE sometimes at a premium and sometimes at a discount. A premium between AMPE and IMPE opened up again from Autumn 2009, increasing through 2010 and 2011. However, with the weakening in commodity values during early 2012, the premium has fallen to its lowest since March 2010.

Volatility continued during the second half of 2012 as supply concerns in the Northern Hemisphere began to build. Since June 2012, prices have increased consistently, only pausing at the end of 2012. 2013 has seen prices push on further and reach record highs as wholesale markets respond to the tight supply situation.

Movements in the IMPE over the period are due to two factors.

The first is variations in the value of Sterling against the Euro. Intervention prices are fixed in Euros. If Sterling strengthens against the Euro, intervention prices measured in Sterling fall, and so the IMPE falls. When Sterling falls against the Euro, the IMPE rises.

The IMPE has risen during seven periods of weakness for Sterling against the Euro in the first half of 2003, the second half of 2004, the second half of 2007, the beginning and the end of 2008 and the autumns of 2009 and 2010. For most of the remainder of the time, Sterling has strengthened against the Euro.

The second reason for movements in the IMPE is a change in the value of intervention, measured in Euros. There were intervention price cuts in July 2004, 2005 and 2006 for butter and SMP; and in July 2007 for butter only under the Mid-Term Review. A further cut in the intervention price for SMP was made in September 2008. In 2009, the introduction of a tender system for sales of butter and SMP to intervention further weakened intervention prices.  The tender system finished at the end of February 2010.


For further information on IMPE/AMPE use the IMPE/AMPE Guide