UK dairy prices accelerate as tight cheese market drives milk higher

UK market prices and farmgate milk prices are improving faster than expected, and certainly quicker than in Europe. Following further strong price increases this week, six processors are now paying 38–39p per litre (€0.44–€0.45) for a standard 4.0% fat, 3.3% protein litre. The October average is now above 36p (€0.42), although the range between processors remains wide. Cheese is still the main driving force, with lower milk volumes and tight cheddar stocks supporting the market. While some European traders seem to have few concerns over milk volumes, the situation is different in the UK and Ireland. The latest data show that UK milk production is now tracking 3.7% below last year, while GB volumes are 4.2% lower. At the same time, significant curd exports earlier in the year mean that cheddar stocks are tight. Buyers are only beginning to realise this now, and there is an element of panic buying in the market. Whereas curd and young mild cheddar in Europe are priced at around £3,150 per tonne (€3,666), and Irish sellers are moving from £3,250 (€3,782) towards £3,300 (€3,841), many UK processors will not sell mild cheddar for less than £3,400 per tonne (€3,957). Mature cheddar is around £4,000 (€4,655), while extra mature is at least £4,250 (€4,946). However, some cheaper New Zealand cheddar is circulating in the market, which threatens to undermine sellers. GDT continues to weigh on sentimentThe latest GDT result also continues to weigh on sentiment. Mozzarella is around £3,350 per tonne (€3,899), and that price will also need to rise to cover rapidly increasing milk prices. UK Red Tractor frozen butter is being offered at £3,600–£3,650 per tonne (€4,189–€4,248), with fresh butter requiring about a £100 (€116) premium, as cream is trading at £1.72–£1.75/kg (€2.00–€2.04/kg). Perceived high EU butter stocks continue to cap values, although traders question how much unsold product is genuinely available. British Red Tractor butter is unlikely to be sitting without a home. However, cheaper US and New Zealand butter remain a threat to both domestic and export markets. Strong export demond for SMPUK-origin SMP continues to firm on the back of relatively empty driers and strong export demand, with sellers quoting around £2,750 per tonne (€3,200). Whey is also stronger, supported by rising EU values. Spot milk remains stable in the mid-to-high 47p per litre range (around €0.55), with some loads trading at 50p (€0.58). Currency disclaimer: Sterling prices have been converted into euros using an indicative exchange rate of £1 = €1.16376. Euro equivalents have been rounded and are intended for reference only. Exchange rates may fluctuate during the trading day.