Edinburgh, June 27 - Milk prices appear to have stabilised in the UK recently after a period of volatility in the world market caused by the economic slowdown and over supply, First Milk Communications Director Paul Flanagan says.
"I think if you look at prices farmers are receiving world wide, the prices are lower than certainly the peaks of 2007. The market clearly is volatile," Flanagan told Reuters at Scotland's four-day Royal Highland Show which ends on Sunday.
Farmgate milk prices in the UK were around 17-18 pence per litre about three years ago. Soaring demand for powdered milk, particularly from China, India and other parts of Asia, pushed prices up to an average of around 26 pence.
While prices remain above pre-boom levels, at around 22 pence, rising production costs for feed and energy have eroded profits.
Flanagan said the global economic crisis had hit markets in Asia, including China, which were major markets for powdered milk.
"We're seeing riots in France and protests in Brussels (by dairy farmers), and even in America and in South America farmers are struggling and in Australia we've seen prices come down dramatically, so it's a world-wide phenomenon."
But although there had been price drops earlier this year, recently there had been "much more stability", particularly in the UK "and any cuts have been pretty isolated".
He said First Milk, the UK's largest farmer cooperative, paid its 2,500 members in central Scotland, England and Wales around 22 pence per litre, and few farmers were getting more than the cost of production at the moment.
To help the market, Flanagan said, the EU had decided to intervene and establish large buffer stocks of milk powder and to hold them when prices rose. The United States was taking similar action.
Commenting on a global recovery, he said: "Various commentators say it's going to be the back end of this year, the early part of next year.
"I think everybody's saying that with much lower prices there'll be less milk powder, supply will tighten and prices will go up, and that's pretty much the view internationally."
He said First Milk's was increasing its production of higher-value branded cheeses, which would account for 20 percent of cheese production in the current financial year, bringing a higher yield in this sector.
Referring to the collapse of major cooperative Dairy Farmers of Britain, Flanagan said 90 percent of the producers had found other buyers, with First Milk taking on about 25 percent.
DFOB was put into receivership this month.