There has been no ‘net’ benefit to farmers' finances from record high milk prices as they have increased at the same rate as input costs, analysis by AHDB shows.
Despite milk prices increasing by more than 10ppl on average since the start of the year, the levy board says it has not yet seen any significant improvement in production.
Milk production typically responds positively to higher farmgate milk prices – assuming production costs remain relatively stable.
However, with the rapid increase in input cost inflation since summer 2021, GB milk production has been lagging behind year earlier levels.
"This deficit in production has persisted into 2022, even through the peak production period," says Patty Clayton, lead dairy analyst at AHDB.
"And despite average milk prices increasing by more than 12ppl since the beginning of the year, we have not yet seen any significant improvement in production."
When looking at how input costs have been climbing in relation to milk prices, Ms Clayton says it becomes apparent why that production response hasn’t happened.
"In fact, the delayed response in milk prices to the rapid inflation witnessed in Q4 2021 suggests many farmers will still be working to fully recover the relatively large cost increase from late last year," she says.
