As UK dairy prices grow, farmgate milk prices slip

A free comparison tool​ launched by the UK Office for National Statistics’ offers consumers insight into how prices of dairy staples have increased compared to 2022.

From hard cheese to butter, milk and baby formula, all dairy product prices tracked by ONS have seen double-digit increase since last year.

Hard cheese (44%) and cheddar (42%) have seen the steepest price rises, averaging at £9.98 and £9.29 per kilo respectively compared to last year’s £6.92 and £6.53.

Increases of 30% or more have also been recorded for semi skimmed milk, whole milk, soft cheese, and butter. Meanwhile, parmesan cheese and infant formula saw more moderate increases of 11% and 12% respectively.

Combined, the dairy basked saw an annual price rise of £14.31 - an increase of 23% on 2022.

Inflationary pressures continue put strain on the supply chain

While headline inflation in the UK is 10.1%, food and drink prices rose 19.1% in March, making this the fastest annual increase that shoppers had faced since 1977. Experts say it is unlikely that retail prices will fall any time soon, despite a drop in wholesale food prices and weakened demand. In dairy, British consumers have been trading down, with cheaper private label items seeing an uplift in purchases while branded product volumes have decreased in recent months.

A key reason why retail prices aren’t falling quickly enough in the UK is the high energy, water and housing inflation – currently at 26.1% - which continues to put significant pressure on the whole food supply chain.

Dairy farmers are facing additional challenges to cover their production costs due to falling farmgate milk prices, all while trying to balance the still high input costs. In the UK, the average milk price for March 2023 was down 4.8% on the month prior, and stands at 45.98 pence per liter (around $0.58 per liter, where 1L is 0.022046 cwt). In comparison, US farmgate milk prices were down 2.31% month on month in March 2023, standing at 21.10 cwt, down from 21.60 cwt in February. UK prices continued to decline in May, with major buyers such as Muller and Credition announcing reductions of 2.5ppl each.

With wholesale prices for all dairy products down and milk production rising seasonally, further pressures are expected on milk prices over the next two months.