Milk Price

January 2002 Update

There are two tables

Every Day Collection                            EDC

Every Other Day Collection                EODC

CAUTION: The tables were produced prior to

·         Milk Links price cut of 0.5ppl announced 13^th December effective 1^st December and any announcement made thereafter.

·         Peninsula's further announcements in Dec / Jan

This approach is judged by the author as the fairest comparison prior to a slide in prices.  The situation will be reviewed again in April.  Please read all the notes carefully.

Background

Following a summer of improving prices the situation has been turned on its head with both Peninsula and Milk Link cutting prices and Diary Crest / Unigate surprisingly holding until April 2002.  The main features of the market situation are:

·         Competition amongst processors to maintain / increase market share

·         No shortage of Milk: production in the UK is up 100 million L on last year - a good forage year negated F&M effect and the usual response by producers to a situation hitherto of good milk price and low (realistic) quota costs.

·         Low International Commodity Prices

·        Strong £ vs. € - UK Gov itself published a £40 change in margin for every 5% change in the exchange rate

Further Notes to Table

·        all quality Bonus paid 3,000,000   2,000,000   & 1,000,000 L collections on high or moderate constituent qualities.

·        Calving Patterns are all year round or 6 month spread with 66% in first 3 months.  Price is that projected for 12 months and is not a month by month price

·        Dairy Crest: There is no cost of leaving but there is a 12-month binding notice.   The Unigate D.Crest group has approx 50% of its production in Liquid the remaining in manufactures.

·        Unigate: Unigate' s seasonality and summer milk or level bonuses to be maintained from 1^st April 2002 for their original contract but not for their manufactures contract

·        MilkLink - a joining levy for 3 Years of 0.2ppl has been deducted.  Members voted overwhelmingly to change structure and proceed with 5ppl max guarantee to back industry financing of processing ventures.   From the 13th payment - ie profit of the business normally distributed in July, a proportion can go into the general reserve and a proportion into members loan accounts available for withdrawal upon leaving.  MilkLink has now got the farmer approval it requested and can proceed to full vertical integration.  But what to buy or with whom to joint venture.

·        PENINSULA - A 0.5ppl new members levy payable for 3 years (1.5ppl) has not been deducted.  If not an existing member having weathered a 3-year joining phase deduct 0.5ppl from the prices quoted.