Commodity Milk Value

The team at Freshagenda has developed a Commodity Milk Value (CMV), to provide industry participants with timely updates of the outlook for expected commodity milk farmgate values (“FGV”) for the next two years.  This can be applied to Australian, New Zealand, US and European industry contexts.

This has been developed as one of the key outputs of our Global Dairy Directions analysis which provides an outlook for global trade and projected commodity product values based on market fundamentals. These projected values are a guide to commodity prices in the future and have been developed using demonstrated correlations between key supply chain variables & historical spot prices.

The latest update to the spot Commodity Milk Value was posted in early May 2017.

Based on trends in Commodity Milk Value and capacity to add value, we forecast an indicative southern farmgate milk price for two seasons ahead. Find the latest update to our milk price outlook here.

How the Commodity Milk Value is calculated

Our process calculates a commodity milk value in line with the diagram on the right as follows:

  • Draw on our existing Global Dairy Directions analysis of projected commodity product prices (for milk powders, cheese and butter), taking account of relevant exchange rate forecasts.
  • Assuming a relevant expected product mix for major manufacturers
  • Applying direct conversion and overhead costs
  • Deducting an allowance for profit retention
  • Calculating returns to the relevant milk pool and determine the average commodity milk farmgate value (FGV) per kg milk solids.

This can then be applied to provide forward indications of likely available full-year farmgate milk prices, by assessing the likely scope for further added value in each region.

Australian industry

The CMV has been tracked over recent years and our system maintains a projection of the index for the coming two years for the southern Australian milk pool. Our service will provide regular update (i.e. quarterly) of the CMV and FGV, as global market and economic variables change.

This can be clearly explained, packaged and made accessible to users (farmers, processors, and other participants) as appropriate for their business decision-making.

how to derive the milk index