Credit to Crediton! That’ll be Crediton Dairy for the purposes of this article, not Crediton Milling!
Because if Arla hadn’t surprisingly increased its price for October on the day this newsletter went to press then Crediton Dairy would have knocked it off the top spot of the milk price league table (excluding retail aligned farmers) and become the UK’s highest paying milk processor on a standard litre* basis. So near yet so far! Crediton’s October price will be 28.5p (which restores it to its February, pre-Covid level), Arla’s standard litre will be 28.66p.
An article by Chris Walkland
It is also worth noting that Crediton is a liquid orientated dairy, and by far the highest paying one. Between January and June this year, for example, it paid over 1.5ppl more than Muller (but 1.3p a litre less than Arla, which has commanded the top spot in the table since January 2019 by my reckoning.)
In fact Crediton’s price is also probably very similar to the returns Tesco farmers will be getting these days, assuming Tesco farmers are on a 70% scaleback price [i.e 70% of their price is the Tesco price and 30% the standard Muller Direct price, and with 1p+ deducted for the additional cost of ‘hoop jumping’ that Tesco farmers have to do]. It used to be the case that aligned farmers received a price that was a country mile ahead of non-aligned ones. But not at the moment, compared to some processors.
Across the South West the average milk price of 11 buyers who publish their prices (some don’t, and one, Parkham, is estimated from a formula) is 27.8p for October. That’s a “best guess” weighted price factoring in that Arla collects more milk than, say, BV Dairy. The average is supported by 28p+ prices from four buyers – Crediton, Arla, Saputo and most notably, perhaps, Wyke, which has been paying a price in recent months that needed redress, which it has now had. Its near neighbour in Barber Towers is currently paying 0.2p below the 28p threshold on the 4%,3.3% basis. No volume bonuses have been factored into these prices remember, which is an important factor for some farmers.
The future for cheese production
Looking further forward and the prospects for many of the companies in the region is looking pretty good. Of the 11 companies tracked, the five cheesemakers should be set fair as cheese stocks are very tight after Covid, and demand still good, if not as insanely good as it was during (the first) lockdown.
Currently the price of young cheeses in Europe like Gouda are increasing towards and over €2900/t. That’s important because strengthening young cheese prices generally lends support to harder cheeses like cheddar, and vice-versa. But against that whey prices are still in the doldrums. The latest MCVE price published by AHDB, and which gives a representative milk price value from mild cheddar and whey returns puts the price at 29.5p after transport of 2ppl but before a processor margin. On that basis, and allowing, say, a 1.5ppl margin I think the cheesemakers are paying a pretty fair price.
On the fresh liquid milk side (i.e not the Long Life / flavoured sector that Crediton is in), the market is a lot better than it was and some closed markets are (or at least were!) re-opening. But we know the liquid sector was in a mess before Covid with low returns, then went into meltdown during it, and is going to stay ruffled for a while yet. But the spot price is still above 30p, and skim milk concentrate prices are also healthy too. Both can be significant in the make-up of any B-price element of a milk price.
A positive note about milk prices
On the positive side, Medina’s closure of its Hampshire dairy, and merger / alliance / partnership (whatever words you wish to use) with Freshways is very significant, I think, as production capacity will be better aligned to demand than ever before. But it will take months for this to have an effect on returns and prices, I suspect. Still, it’s a positive in a sector which hasn’t seen many of those for a fair while, so we’ll take it!