Dairy Market Indicators Review

Description

AHDB wishes to conduct a review of our dairy market indicators. The *AMPE and MCVE market indicators are used in farmgate price formulas and negotiations but need to be kept up to date to ensure accuracy. Reviews have been conducted at roughly three yearly intervals. Following the last review in 2020 estimated factory costs have been kept up to date by applying relevant inflationary indexes to energy costs including gas and electricity, and labour). AMPE (Actual Milk Price Equivalent) is an indicator of the factory gate value of a litre of milk used for butter and SMP while MCVE (Milk for Cheese Value Equivalent) assesses returns from mild Cheddar and whey powder/butter. Processor costs and yields in the calculation of them are subjects to change over time due to factors such as economies of scale, more efficient factories, improvements in milk solids and changes in energy sources. In order to address this, AHDB wish to commission a review of AMPE and MCVE to ensure representativeness. The review will seek to establish how UK processor costs and yields have changed and what representative figures for these would be. The conclusions of the review will be reported in the spring of 2025. Although they are not intended to be correct for every plant - there are instead designed to be typical of the industry - it is important that they are updated from time to time as technology and costs develop. It is important to note that milk price indicators are indeed, "indicators". There is no intention to provide an absolute value. There is variability in costs across different processing plants and factors such as milk composition, plant utilisation, and efficiency will affect this. The value of market indicators is as a basis for identifying trends and to attempt to use them for more precise purposes goes beyond the limits of their scope and accuracy.