The gap between the 10% highest and 10% lowest paid milk producers has almost doubled in a year, as milk prices for all have fallen.
Analysis of Kingshay Dairy Manager recording conventional Holstein Friesian herds to be published in its Dairy Costings Focus Report 2015 reveals the true range in prices producers actually receive for their milk, rather than that estimated by looking at contracts. It shows the lowest paid 10% of producers’ average price for March 2015 was just 21ppl, only two-thirds the amount received by the highest 10% paid at 32ppl.
“In spring 2014, the gap between them was just 5.6ppl. But as the highest paid producers have seen milk prices fall by less than 4ppl, the ones who were already being paid less have seen prices fall by almost 10ppl,” says Kingshay director Richard Simpson. “The gap between them has been steadily widening and is now more than 11.6ppl.”
The data also reveals that 70% of producers saw their milk price drop by more than 6ppl between March 2014 and March 2015 and for 25% it was more than 10ppl lower.
Yet for the year to March 2015 rolling average milk prices dropped by just 2.1ppl because milk prices only started their steep decline in September 2014. “But looking at the detail, it shows the highest 10% saw just a 0.6ppl fall, while the lowest paid 10%, who already received more than 4ppl less saw a fall of 3ppl,” says Mr Simpson..
“It seems that UK market segmentation has come to the fore with oversupply on the World market. While the gap may close whenever prices rise again, it is as likely it will widen again with any future falls.
“With this segmentation, the industry needs to look beyond averages to understand the impact of current milk prices on a significant proportion of producers supplying the commodity market.”
