Farmers have welcomed recent positive milk price moves in recent weeks and some now believe that commodity prices indicate that a farmgate price of 30p per litre is achievable.
Recent price announcements from First Milk, Muller and Arla reflect the strengthening seen in dairy commodity prices.
Farmer-owned First Milk announced a milk price increase of 1.2p per litre for July taking its price on a liquid standard litre to 27.20p, whilst the manufacturing standard litre will be 28.12ppl.
NFU Scotland’s Milk Committee, which visited First Milk’s headquarters in Paisley on Tuesday (12 June), said the "tone of the market is definitely changing".
Milk Committee Chairman, John Smith said: “We firmly believe that a farmgate price of 30p per litre is achievable. It is essential that all parts of the supply chain ensure strengthening markets are reflected quickly in prices.
“More increases must follow as futures markets and physical sales of commodities are both very positive. All processors must take this opportunity to build trust in their pricing models by increasing farmgate prices at a pace and magnitude that reflects where the market is.”
Key price indicators, the Actual Milk Price Equivalent (AMPE) and Milk for Cheese Value Equivalent (MCVE) now sit at an average of more than 33p per litre.
Prices for milk powders, butter and cream are all up by more than 10 percent in the past month.
Mr Smith added: “That justifies price increases that would allow dairy farmers to start to rebuild their balance sheets after a very difficult extended period of poor prices and higher costs due to a very difficult winter.”
At the visit to First Milk, committee members heard more about the co-op’s recent move back to a simpler pricing model for all members, and the development of a strong farmer governance structure.
The new focused strategy is designed to simplify and streamline the First Milk business for the benefit of their members after several difficult years for the co-op.
The committee also discussed the need for a more open dialogue with milk buyers on Red Tractor standards and the prospect of legislation on dairy contracts, after Defra accepted a recommendation from the Grocery Code Adjudicator (GCA) that dairy farmers are disadvantaged by an imbalance of power in the dairy supply chain.
Milk Policy Manager, George Jamieson said UK farming unions want to see this as a "massive opportunity" for the entire dairy supply chain to develop an agreement on contracts that build "trust and fairness", which also resolves volatility.
“That there is a problem is clear to see. Any progressive processor confident in their business and who values their milk supply should view this initiative as an opportunity,” Mr Jamieson said.
“Sadly, the reaction of some processors is to view this as a threat and are already using 'fear' tactics to cloud the issue.”