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DairyCo Supply Chain Margins report 2010
Published 5 October 10
The DairyCo Supply Chain
Margins report out this week calls for dairy farmers and the
industry to keep a close eye on how long the farmgate price takes
to react to improvements in the commodity market.
DairyCo senior analyst, Patty Clayton, says: "Our report shows
that farmers' share of the retail price of milk and Cheddar cheese
has decreased in the past year. This appears to be due to two main
factors; an increase in the retailers' gross margin and a lower
farmgate price. Despite a recovery in commodity markets, the
farmgate price remains at a low level.
"We need to keep an eye on AMPE which is currently above farmgate
prices," says Mrs Clayton.
"As AMPE measures returns to milk processors from turning milk
into butter and powders, it gives an indication of the direction of
the dairy markets but should, on average, be lower than the UK
farmgate price given the importance of the liquid milk sector in
the UK," explains Mrs Clayton.
AMPE remained below the farmgate price for much of the last milk
year, but with the recovery of the commodity markets, moved ahead
of the farmgate price in April 2010. The gap between AMPE and
farmgate price is currently the largest it has been for almost
three years although with recent increases in milk prices, this gap
has narrowed slightly.
"It takes time for the farmgate price to reflect the ups and downs
in the commodity market, but we need to watch the time it takes for
the farmgate price to adjust and whether it will attain a level
which will provide dairy farmers with a sustainable
return."
DairyCo is now planning to commission a report on price
transmission which will investigate how well the markets are
working, and how quickly and fully changes in dairy market prices
affect farmgate milk prices. The report is expected to be
completed by the end of the 2010/11 financial year.
Download the Supply
Chain Margins report.
Ends
Date October 5 2010
For further information:
N: Helen Fina
T: 02476 478696
E: helen.fina@dairyco.org.uk
W: www.dairyco.org.uk
DairyCo's aim is to promote world class knowledge to British dairy farmers so they can profit from a sustainable future.
To achieve this DairyCo aims to:
- Ensure farmers have access to world class information needed to improve competitiveness, GHG reduction and productivity
- Ensure farmers have access to direct and indirect support to help them improve their profitability through better business management
- Ensure that dairy farming is reducing its impact on the environment
- Ensure farmers understand the benefits of breeding and use the related tools
DairyCo is funded entirely by milk producers, via a statutory levy on all milk sold off-farm, at the rate of 0.06p per litre. This provides an annual income of around £6.5m.
DairyCo is a division of the statutory levy board, the Agriculture and Horticulture Development Board (AHDB).
