Milk price hike 2022: why could prices rise by 50% in UK supermarkets amid cost of living crisis?

The price of a pint of milk was once considered one of the main barometers of how in touch a politician was or was not.

While the classic ‘gotcha’ question has almost entirely disappeared from political talk – save for a recent nightmare on Sky News for Tory minister Paul Scully – milk (or milk alternatives like oats and soy) remains a staple in most UK shopping baskets.

According to the Department for Environment, Food and Rural Affairs (DEFRA), Britons consumed more than 11 billion pints of it in 2020.

However, despite the cost of living crisis, the price of milk is expected to skyrocket in the weeks and months to come.

So how much could this increase – and what caused this situation?

Here’s what you need to know.

Essentially, milk prices are likely to rise because the cost of production has increased.

But there is a larger context to be aware of.

Dairy producers and processors have faced squeezed profitability for more than a decade.

According to Ash Amirahmadi, the boss of major dairy processor Arla – a co-operative which is the UK’s largest supplier of fresh milk – the price of milk has fallen by 7% over the past decade despite an overall rise of 26% consumer prices.

Indeed, Agriculture and Horticulture Development Board (AHDB) analysis showed that the price of a pint of milk rose by just 4.4p (16%) to an average of 28.3p in supermarkets between 1995 and 2021.

This is despite the fact that the Bank of England indicates that inflation rose by almost 49% during this period.

Thus, the British consumer may have paid less than he should have for the milk.

This situation has left dairy farmers in a financially weak position – a position that has been temporarily worsened by the Covid pandemic.

The closure of offices and hospitality has caused the price of milk to drop well below what it costs to make, according to the National Farmers Union (NFU), forcing some farmers to throw away their produce.

And since last summer, farmers have also been faced with rising production costs.

“We saw inflation on farms, on feed, fertilizer and fuel, starting in June or July last year,” Mr Amirahmadi told the PA news agency in March. 2022.

“There were already pressures building up, but since the Ukraine crisis, that has only increased exponentially, especially things like fertilizers.”

The NFU says the price of nitrogen fertilizer is now five times higher than 12 months ago.

Many raw materials needed for its production, for example potash, come from Russia, which means that it is particularly exposed to the Russian-Ukrainian war.

The AHDB says the price of red diesel – the type of fuel used in tractors – was up 38% year-on-year in February 2022, while the price of feed wheat was up 60% from compared to 2021 in March 2022.

Mr Amirahmadi said the rising costs of dairy production meant his cooperative Arla was “calling for time on cheap milk” when he launched its five-year strategy on March 25.

He did not give an estimate of how much the prices could rise, but said he believed the increases would trickle down over the next five years.

It says the cost of a four-pint bottle of milk could rise from an average of £1.15 to between £1.60 and £1.70, an increase of almost 50%.

However, he did not say when that might happen.

Average shelf prices from major UK retailers currently sit at £1.25.