Some of you will have seen this graph I produce on farm or in a previous newsletter.  The latest data is up to the end of October 2016 and it continues to show the close relationship between milk price and oil price.  Since the last update both prices continued to drop from their peaks with oil prices dropping from a peak of $110 in July 2013 to a low of $33.62 in January 2016, a drop of 70%.  Since then they have increased back to $53.72 by the end of December 2016.

Milk prices have fallen from a peak of 33.95 ppl to a low of 19.99 ppl a drop of 42%, with prices now rising again to 24.17 ppl at the end of October.

So looking forward, where should we be pitching prices for milk in budgets?  Most buyers will be offering between 28 and 30 ppl by March 2017, but how long will this last.  The future prices have already shown that the peak has been reached and suggest the price may start to drop again from the back end of 2017.  If you look at the average UK price over the last six years it sits at 27.59 ppl, I would suggest that this is a sensible price to plan for going forward.  There will of course be volatility in the market, but if you can structure your business to be viable at this price then in the good times you can generate cash to help your business survive in lower milk price times.

For help with establishing your business’s true breakeven milk price contact Phil at pcooper@fcgagric.com or your local FCG office.