Chairman’s Update
Now that the peak milk production for 2024 has been passed by over 12 weeks, milk prices continue to increase with two further rises in Q3 (July August & September) for conventional and three rises for organic.
Although the milk price increased for September 2024, the MMG Board were particularly frustrated and disappointed that there was no change to the conventional August price. It is positive to see organic milk prices rising by 6.25ppl this year. The MMG Board remain optimistic about the organic sector due to demand exceeding supply. It is unlikely organic milk volumes will rise in the short term and as a result organic milk prices should remain stable. The ingredients contract has certainly delivered benefits to the Müller Direct price since being launched in April 2023. However, it has been somewhat disappointing with the level of milk being paid at the ingredients price. This is due to volumes of milk from Müller producers remaining strong. The Müller balancing price (as independently calculated by milkprices.com) has also been lower than expected, which has impacted all farms.
As we head towards the trough milk production months there is more scope for optimism. Positive seasonality started on the 1st of August 2024, the forecast volumes for ingredients milk is reducing and the ingredients price is increasing.
The MMG Board are fully aware of the cash flow challenges dairy farms are generally experiencing, and this is hardly surprising given that milk prices have been lower than published break-even / COP milk prices. With the September milk price increase of 1.25ppl the Müller Direct price will achieve a level that is marginally above COP – and quite rightly so.
But will 40.25ppl base price be sufficient to secure milk production going forward?
In addition to the ongoing above inflation increases for labour, machinery and contracting, the future cost of environmental compliance becomes more evident with MMG forecasting an average cost of 2.8ppl for the next 10 years for farms to install suitable silage clamps and slurry stores. A proportion of this will need to be passed down the chain to keep dairy farms environmentally compliant. Now is the time the industry needs to talk about a sustainable milk price rather than a cost of production price.