Dairy markets: spot milk prices collapse totally in the UK

The market for uncontracted milk in the UK has completely disappeared in just a matter of days. This week, spot prices for surplus milk in the UK have collapsed entirely and fallen to 0p/litre. Millions of litres of milk are now being produced in the UK that nobody wants, which has forced many farmers up and down the country to dump their milk.

Such a collapse in demand is unprecedented for the UK’s dairy market. The sheer pace of its collapse has caught many UK dairy farmers off-guard and left them with no option but to dispose of milk. Some milk is even being used as a feedstock for anaerobic digester (AD) plants. As much as 12m litres of milk is being produced in the UK every week that doesn’t have a home anymore.

we are now seeing in retail is a hangover from stockpiling; people visiting stores less often, leading to reduced volumes

Foodservice shutdown

The COVID-19 pandemic has played havoc with the UK’s dairy market, which is different to Ireland as it is mostly based around supplying liquid milk to the huge UK consumer market. The shutdown of restaurants, cafés, takeaways and other food service outlets has crippled a vital route to market for many UK dairy companies, forcing them to slash milk prices and ask farmers to reduce milk supply.

Concerns

In a frank and honest letter to milk suppliers, Robert Graham, managing director of Graham's Family Dairy in Scotland, said he had “significant concern” around the company’s ability to pick up milk from farms this week.

“Once 'lockdown' arrived, 1,500 accounts such as restaurants and coffee shops closed. Although some of this volume went into retail, what we are now seeing in retail is a hangover from stockpiling; people visiting stores less often, leading to reduced volumes; and some categories such as skyr and cottage cheese being affected severely due to customers shopping faster and only purchasing 'essentials'. This has thrown out our milk balance versus incoming milk and we have serious concerns around finding homes for it as there is currently no capacity in the UK,” wrote Graham.

Disposals

Over recent days, a number of milk suppliers to Freshways, the UK’s largest independent dairy processor, were forced to dispose of thousands of litres of milk due to a delay in their being milk collected.

Freshways said it was unable to collect milk from all its suppliers due to staff absenteeism as a result of the COVID-19 virus.