A report from the United Kingdom has warned of retail shortages of butter and cream by Christmas as a result of record wholesale prices.
The warning from Arla Foods was answered by the National Farmers’ Union dairy chairman Michael Oakes, who said UK farmers didn’t produce the spring milk flush that processors were expecting.
The boom and bust nature of the dairy market had worn down farmers.
“When prices dipped it hit farmer confidence, and this is now at an all-time low,” Oakes told the UK Farmers Guardian.
“To get a sustainable, long-term milk supply we need a sustainable long-term milk price.”
The sector required a complete culture change to protect farmers from the current volatility.
ASB Bank rural economist Nathan Penny said high butter and milk fat prices were here to stay.
“Demand has fundamentally shifted higher as consumers now accept that butter is no longer bad for you.”
Fonterra had added production flexibility to optimise higher-priced butter and anhydrous milk fat, also at record high prices, instead of whole milk powder (WMP).
Rabobank dairy analyst Emma Higgins said the WMP forward contract prices from the GDT event moved positively across the remainder of 2017.
That indicated buyers were comfortable despite the anticipated increase in production during the New Zealand spring.
The GDT index rose 0.2%, and WMP prices had an average rise of 0.3%.
Following the dairy derivatives market response, the AgriHQ farmgate milk price forecast moved to $6.68/kg, compared with the Fonterra forecast of $6.50.
The September 2018 milk price futures contract settled at $6.50.
