Latest figures from its Friesian Farm model showed things were likely to remain tight for some time despite hopes the market was in recovery.
However, the company said there was significant scope for cost savings to help farmers through the coming months and put them in the best position when there were bigger moves in the market.
Richard King, Andersons’ head of business research, advised farmers to err on the side of caution when budgeting future milk prices.
“I think it is going to be a slow slog.
“There is a lot of product in intervention and that could weigh on the market. Processors will want to make sure the market really has turned before delivering meaningful price rises.”
That might not happen until after the spring flush in 2017, he said.
Another report, the Kingshay Dairy Costings Focus said farms on the lowest milk price contracts increased production in 2015-16 considerably more than farms being paid higher farmgate prices.
The report highlighted the widening price gap between farmers on the best contracts and those on the lowest-paying ones.
It also showed clear differences in how producers responded in each situation.
The report was based on an analysis of data from Holstein/Friesian conventional herds that use the group’s Dairy Manager service.
A comparison of the data showed the response of farmers in the lowest 10% band for milk price was to increase herd size by an average of 32 cows.
This bid to maintain income by pushing up production resulted in an increase in total milk output of an average of 0.2m litres to 1.2m litres.
Conversely, those farms on one of the higher price contracts typically reduced cow numbers by three or four cows and achieved a smaller increase in average total milk sales – 0.02m litres – by focusing on better forage use efficiency.
“We were expecting the farms with the highest price to be investing in herd size and we thought the lowest-paid would be consolidating and reducing cow numbers to try to reduce B litres,” senior farm services manager Kathryn Rowland said:
As well as showing the widening gap in milk price, the report also highlighted the gap in feed efficiency.
However, farm debt levels in Britain were low compared with other top dairy nations.
It was an advantage British milk producers must protect as milk prices recovered, Kite Consulting managing partner John Allen said.
This spring, on a European milk price of 20.2p/litre, British farmers carried 28p/litre of debt on average, against 155p/litre in Denmark. New Zealand farmers carried 55p/litre of debt, on a milk price of 15p/litre.
That meant British farmers were not spending extra money on interest payments in a downturn.
Many southern hemisphere farmers had invested heavily in land when prices were surging, Allen said.
“We have relatively strong balance sheets in UK dairy. If we were to throw it away through borrowing a lot of money and not paying it off in the good times, that will be deleterious to UK competitiveness.
“We need to be cautious with farmers, as consultants and bankers, about falling in that trap.”
