Dairy prices in freefall with spot milk at 15ppl plentiful and falling like a stone

In this bulletin dated 13th March, Ian stated –

Coronavirus is causing a melt down and if the government introduces restrictions the dairy trade is buckling for a very rough ride with some expecting spot milk to be plentiful and quickly down to circa 20p as orders are reduced or cancelled on mass.

Well it has spectacularly crashed to 15p and falling. There is suddenly oceans of surplus milk desperately trying to find a home. Today some milk has gone into AD plants, three processors have dumped milk and two medium/small processors have informed farmers that they can guarantee to collect all the milk this week but can’t guarantee to collect it all over the weekend and next week and to be prepared to dump it on the farm. Note there are Environmental Agency rules in circulation for the spreading of milk, if anyone would like a copy email sally@ipaquotas.co.uk

One processor claims to have been offered milk FOC for the cost of transporting it!

The milk market has all changed very quickly. The panic buying of dairy products with retailers restricting milk purchases has reversed as demand plummeted. Retailers were screaming for milk 10 days ago and now it has died as quick as it started. The stock piling has stopped and consumers freezers are full of milk and dairy products. Whilst there is an expectation demand will start to increase by retailers there is a definite need for speed. Processors across GB are struggling to manage the huge fluctuations in retailers demand.

To compound matters, the food service, restaurants, pubs, hospitality businesses have been rushing to offload unwanted stock and cancelling orders. Even within retailer stores remember all the dairy products sold over the deli counters and coffee shops that have also closed whilst stores have remained open. This counts as Food Service business and not retail

AHDB have issued a release estimating the UK food service sector accounts for 8 million litres of milk and this will be offset by increased demand from retailers which equates to a 10% increase. That 8 million litre figure is the source of much controversy and debate and nowhere near accurate and should be closer to 20 million litres and for sure retail sales will not offset this figure as suggested by AHDB. In fact, one set of figures claims retail sales are now around 12% below what would be expected at this time of year.

Processors also have the challenge of keeping the show on the road with tanker drivers and other key workers having to self-isolate.