The price of Cheddar will rise by at least 10% over the next six months in reaction to a major tightening of milk supply, manufacturers have warned.

Wet weather during the crucial spring flush has resulted in lower-than-expected milk yields, putting further strain on an already tight UK supply. UK cheese production was already 4.7% lower over the past year than in the previous 12 months [DairyCo], and farmers say the poor spring will send yields even lower throughout the year.

With global commodity prices rising fast in response to higher world demand for dairy, some producers are opting to put milk into SMP or butterfat rather than less profitable Cheddar. The commodity price for SMP has risen 6.4% in the past week alone and 44% in the last year to £2,127/t [Mintec]. The weakness of sterling is also playing a part, with exports up and imports down.

"I'm quite worried," said Wyke Farms' MD Richard Clothier. "The firming of commodities could be taking milk out of cheese, and we haven't even hit the trough months yet."

At the current rate of milk production, October could see the "shortest milk supply month ever", Clothier said, and producers urgently needed higher prices to persuade farmers to put milk into cheese rather than commodities.

An increase of at least £300/t for mild Cheddar was needed, which would take the price to £3,000/t, added Arthur Reeves, external affairs director at Dairy Crest. "The implication is that shelf prices will go up and people will promote less. The mild Cheddar price is already edging up and will do for the next six months. Cheese needs to be a bit more profitable."

A £300/t wholesale price rise would equate to 10% more on the shelf price if supermarkets passed it on, which was a realistic expectation, said Clothier.

"There's a general feeling that the market is tightening and with the dreadful spring rain there's a real issue around milk availability and cheese supply," added Alastair Jackson, MD of Pilgrims Choice owner North Downs Dairy.

A number of producers have raised the prices they pay to farmers this week, which analysts say could be a precursor to asking retailers for better returns. Milk Link increased its member price by 0.5ppl to 23.75ppl for members on manufacturing contracts and 23.97ppl for liquid contracts, while the Arla Foods Milk Partnership price rose by the same to 24.5ppl. First Milk increased its cheese price by 0.5ppl from this month, Wyke Farms' price will go up by 0.75ppl between now and July, and Glanbia and Belton Cheese have also announced rises.