The coronavirus pandemic has caused turmoil in some sectors of the milk market and the organic sector has not escaped entirely. For those who supply the food services sector demand dried up almost overnight. Those producers who supply farm shops and home delivery services have seen demand rise sharply.
The Organic Milk Suppliers Co-operative (OMSCo) had felt the ill wind last year on the back of BREXIT and US trade tariffs and this resulted in them introducing A & B pricing and a price reduction of between 3-4 p per litre. It now seems likely that on the back of Covid-10 the other major buyers Arla and Muller will be forced to reduce their prices by similar amounts as more milk is forced into the conventional sector. The OMSCo allocation looks set to remain at 90% of the base year, which is the best of the last three years and their A price remains the same as last year. With the B price representing 10% of allocation and the spot market price currently under extreme pressure it may be that they are unable to hold their B price for the whole year and this could cause the overall price to drop later in the year.
In the short term, the market looks as if it will remain over supplied and with a number of producers already committed to entering the market in 2020 and 2021, the pressure on milk prices seems set to continue for a while.
The other worrying factor is that protein prices have risen substantially over the last 12 months and with the availability of both Soya and Sunflower meal from China facing increased tariffs and availability issues, the outlook for the winter is concerning to say the least. With the concentrate price already above the milk price (p/kg) the pressure on margins will only continue. Increasing the need for producers to make even better use of grazed grass and silage than in previous years will be paramount in the shorter term.
Contact William at email@example.com or your local FCG office, to review your forage production and utilisation and identify where improvements can be made.