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Butter dominant influence on milk prices

Staff Writer |
The meteoric rise of butter prices has been instrumental in holding up farmgate milk prices, AHDB reported.

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Since last spring, the value of milk, as measured by AMPE, has been rising steadily despite powder prices remaining at, or near, intervention levels.

Normally, the value of butter contributes 45%-50% to AMPE, with powders contributing the remainder.

As the value of butter increased, and powder prices remained constrained by intervention stocks, this rose to around 55%.

In May, with wholesale butter prices at a new high of £4,300/tonne, it accounted for 65% of AMPE.

Historically average farmgate milk prices in the UK have tracked AMPE, with a lag of a few months.

As such, although powder prices have started to show some tentative signs of recovery, it is the butter market that is putting upward pressure on farmgate prices.

Over the next couple of weeks AHDB will look at whether the rise in butter prices is due to a structural change in the markets, or a short term market imbalance to help determine how sustainable the increase is likely to be.

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