After stalling for a while in the spring, UK farmgate milk prices resumed their upward trajectory from July onwards. By October the average price received by farmers had reached 31.6p/litre and then stabilised in November before falling slightly in December. Recent prices are nearly 12p up on the low point in the middle of 2016 and represent the highest average prices since June 2014. Indeed, it is less than 3p below the highest price ever recorded.
The sustained rise in farmgate milk prices was driven by the strength of some dairy commodity markets. This particularly applies to the butter market, where prices rose from below £2,000/tonne in the spring of 2016 to a record £6,150 in August and September. This reflected trends in global butter markets (see below). However, since then prices have begun to slip back, standing at £4,000/tonne in December, only slightly more than a year earlier. While this is still strong by historical standards, the cooling of the butter market will no doubt feed through to the farmgate in due course. Cheese prices also followed similar trends, although with much more muted movements, but it was a different picture for Skimmed Milk Powder (SMP). SMP prices have been under pressure all year, falling from around £1,850/tonne at the turn of the year to just £1,230 in December.
The improved milk prices are reflected in a reduction in the number of dairy cows sent for slaughter this year. Total cow slaughterings (which include beef cows) in 2017 were down 3% on a year earlier, with most of the reduction thought to be due to dairy animals. One consequence of this is that the prices achieved for cows have been higher throughout most of the year, although the gap was beginning to narrow by the end of the year.