The average price of own-label mild Cheddar stood at £5.86/kg in August according to DairyCo data, 10.1% lower than the year before.
"The market has become distorted by price promotions on branded Cheddar that have effectively made them cheaper than own-label variants," said DairyCo. Some retailers had consequently pushed down the price of own-label Cheddars, it added, with mild being sold for as little as £4.80/kg in some stores.
Falling demand might also be a factor, said PTF dairy analyst Michael Bessey. He stressed, however, that mild Cheddar would always have a market as some shoppers used it for cooking and many preferred its taste.
The price drop comes as farmers continue to raise concerns over the profitability of supplying value cheese to supermarkets.
European agriculture ministers have been meeting this week to discuss measures to support dairy farmers, who are under severe margin pressure across the Continent. These could include a temporary hike in the intervention price and increased export refunds for butter, SMP and cheese.
Defra was keen to contribute to helping the dairy industry, said a spokeswoman, but was not willing to put cash into supporting failing businesses. "Money shouldn't be used to prop up unprofitable businesses or build mountains of unsold produce," she added.
See The Dairymen, p4