The volume of milk produced on UK dairy farms is expected to fall by a massive one billion litres in 2016, according to the UK Dairy Group.
The UK supply has fallen at a consistent rate of 6-7% per month since April, it says, and it shows no sign of stopping.
September milk collections are forecast at 1,080m litres, which is a fall of 7.5% on the corresponding month in 2015.
Meanwhile, it also shows that the overall volume of milk collected in the European Union (EU) is falling, with July collections down 1.4%, while New Zealand production is falling around 1,7% per month.
However, the decrease seen in both the EU and New Zealand comes amid a time when the volume of milk produced on US farms has actually increased, with collections up 2% in August.
According to the Dairy Group, markets will continue to firm until the decline in supply is halted, which means the UK equivalent prices have to rise to 30p/L so farmers can hope to repair their damaged businesses.
And as a result, it is predicting that the UK milk price will reach 26p/L by January 2017 and 30p/L by April 2017.
The Dairy Group’s Nick Holt-Martyn said there is a natural delay between market improvements and changes in the farm-gate price.
This delay occurs, he said, as it takes time for clear market trends to become established and for cash to flow along the supply chain.
While it is hard to pin down exactly how long that delay is looking back over the last five years suggests a 3-5 month lag is the norm.
“Many believe it is shorter when prices are falling and longer when markets are on the rise and with some justification,” he said.
UK milk price recovery
A number of the major dairy companies in the UK have moved to increase the October farm-gate milk price.
Companies such as Dairy Crest, Arla Foods and First Milk have all increased the October milk price paid to their suppliers by between 1-2p/L, following some recovery in the dairy markets.
Dairy Crest has announced a 1.5p/L milk price rise which will be phased out over two months from October 1. An 1p/L increase will come into effect from October 1 and a further 0.5c/L will be applied on November 1.
Another UK-based dairy creamery, First Milk, has also announced that it will increase the milk price paid to its suppliers during the month of October by 2p/L, making it the largest monthly increase since 2007.
Moreover, Arla Foods has also announced that it will be increasing its October milk price by 2p/L from October 1.
