DairyCo

Cream Income to a Liquid Processor

Published 27 July 10

Cream Income to Liquid Milk Processors   

• The price of bulk cream decreased by £120/tonne (7.7%) between June and July to an average of £1,430/tonne around the 20^th of the month.
• This led the estimated cream income to a liquid processor to fall by 0.66ppl (7.6%) to 7.97ppl in June.

The price of bulk cream fell between June and July.Traders were quoting prices of around £1,430/tonne around the 20^th of the month, a fall of £120/tonne compared to the previous month. For further information on wholesale prices please click here. 

The decrease in the price of bulk cream cause the estimated cream income to a liquid processor to fall by 7.6% (0.66ppl) over the period, to 7.97ppl in July.  Annual comparisons show that the indicator has increased by 2.54ppl (46.8%) from 5.46ppl in July 2009.  

It must be noted that the cream income price is based on the spot price of bulk cream for export. A significant proportion of cream is sold on forward contracts, and therefore the income received is likely to differ from the spot price.

The price below only indicates the trend in incomes. The actual income effect and a precise increase in ppl will be difficult to obtain as this requires knowledge, on a daily or monthly basis, of the following:

• Butterfat levels (which will tend to vary and be higher over the winter period).
• Exact prices for bulk cream.
• An exact breakdown of what product they are producing (i.e. whole, skimmed, semi-skimmed etc.).
• The amount of cream wasted in the manufacturing process. 

For historical information on cream income please see Cream Income Sheet. 

All liquid processors generate surplus cream as little liquid milk is now sold as whole milk. This surplus cream has a value with some sold to supermarkets in small pots and some sold in bulk, to be manufactured into other products.

Below is an outline of the trend in cream prices in terms of pence per litre for liquid milk processors.

Outline of how cream income is calculated 

• The bulk cream wholesale price is based on a spot price for export of cream at 40% butterfat. It may not reflect the domestic spot price or price received for cream sold under contract.
• Prices were derived from talking to traders and milk processors on 22-23 July.
• The cream income to a liquid processor is based on the excess cream between the rolling butterfat average for a particular year (previous 12 months) and the average level of fat in liquid milk sold through the retail market (supermarkets, local stores and doorstep) for that particular year.
• The value of the excess butterfat is then calculated on the basis of a litre of cream at 40%.

The weighted average level of fat (whole, skimmed and semi-skimmed) in retail liquid milk is calculated based on TNS retail liquid data.