UK farmgate milk prices keep falling, with First Milk the latest major milk processor to announce it is cutting the price it pays its farmers.
The Scotland-based dairy co-operative said on Friday (2 January) it would reduce its manufacturing price by 2.43 pence per litre to 20.47ppl from 1 February, with its liquid pool price dropping 1.6ppl to 20.1ppl.
First Milk chairman Jim Paice said global dairy commodities prices remained weak and had made it necessary for First Milk to push through a further price cut to its farmer members.
“During meetings which we held across the country in November, we shared our view with members that this market was likely to get rougher before it gets better,” he said. “Unfortunately prices for core dairy products have softened further since the start of December.”
The First Milk board was “acutely aware” of how difficult these market conditions were for farmers, Paice added. “We do not know how long this current downturn will last; however, our priority is to make the business and our manufacturing assets as secure as possible in order that we can continue to process and market every litre of members’ milk.”
Other processors also cut
First Milk’s price cut this week comes after Dairy Crest said its milk prices would reduce by 1.2ppl for farmers on its standard liquid and Davidstow contracts as of 1 February.
Following the cuts, Dairy Crest’s prices will be 26.59ppl for the Davidstow contract and 24.59ppl for the liquid contract.
Group procurement director Mike Sheldon described the cuts as “hugely disappointing” but necessary given the tough conditions in the dairy commodities market.
“Dairy Crest is working hard to provide a positive long-term outlook for the sector,” he said. “Not only are we investing £65m at Davidstow to produce ingredients for the growing global infant formula market, but also, in November, we announced plans to sell our dairies business to Müller Wiseman, subject to competition approval. It has been widely accepted that the economies of scale and efficiencies this sale presents offer the best hope of securing the future of the British dairy sector.”
Arla, meanwhile, announced it was cutting its standard UK milk price by 2.03ppl to 24.81ppl from 5 January, also citing pressures from global markets.
“Global supply and demand are still out of balance, which is continuing to create downward pressure,” said head of milk and member services Ash Amirahmadi. “The knock-on impact of weak international prices on the European markets has affected Arla’s business performance, as well as that of the entire dairy industry in Europe.”
Earlier in December, Müller Wiseman had announced a 1.2ppl price cut for its farmers from 10 January, taking its price down to 25.90 ppl.
The National Farmers Union has criticised the price cuts, with president Meurig Raymond warning dairy farmer numbers were falling fast.
“For the first time producer numbers have dipped under 10,000, with 60 going out of business in November alone,” he said following the Arla price cut announcement. “We will continue to put pressure on government, retailers and the processors with the aim of trying to rebuild an economically sustainable dairy industry. We cannot emphasise enough how awful this downward spiral has been for the dairy industry in the UK.”
According to The Grocer’s Top Products Survey 2014, the retail value of the liquid milk category fell by nearly £90m in 2014 as supermarkets slashed prices as part of an aggressive turf war with the discounters.