EU - In a series of articles, AHDB is looking at how farmgate prices across Europe respond to movements in European wholesale commodity prices.
The first two articles concluded:
- EU farmgate prices are more responsive to falling markets than rising.
- The UK shows more asymmetry in price exposure than most other EU countries. In other words, the difference in the level of exposure on a rising market compared with a falling market is greater in the UK than most other EU countries.
Even when markets are falling, overall the UK still sits in the second tier of exposure to European commodities. For every €1/100kg drop in European AMPE, UK farmgate prices move, on average, €0.5. This means, overall UK farmgate prices have been less responsive to commodity markets than some of the other main EU milk producing nations. Part of the relative stability in the UK comes from product mix and, in particular, the UK’s large liquid milk market.
In this final article, AHDB looks at how the responsiveness to markets differs depending on the end market for the milk.
Source: DG Agri, AHDB, Defra
The analysis shows that the differential between rising and falling markets exists in the UK for all areas except those aligned to retailers. For milk assigned to cheese, other manufacturing or non-aligned liquid contracts, the responsiveness on falling markets has been more than twice that recorded when markets are rising.
The analysis confirms that those on aligned contracts have had very little exposure to the European commodity markets. Many of the prices on those contracts will be moving to reflect changes in cost of production instead.
Due to the markets operated in, milk supplied into manufacturing and cheese processors was expected to show a relatively high sensitivity to European commodity markets. However, analysis of the figures demonstrates non-aligned liquid contracts have shown as much sensitivity to those commodity prices as those supplying into cheese.
Understanding the markets in which a milk buyer operates, and the potential for price volatility, will help farmers understand the impact on their business and better prepare for the future.
* European AMPE uses the published European commodity prices for butter and SMP in Euros per tonne and converts them into a milk price equivalent in Euros per 100kg of milk
To find out more about how EU farmgate prices are more responsive to falling markets than rising, click here.
To find out more about how the UK shows more asymmetry in price exposure than most other EU countries, click here.TheCattleSite News Desk