Liquid milk processor Freshways is to cut its January farmgate milk price by 3p per litre to 47ppl, citing a fall in commodity prices and “negative” market sentiment.
The supplier – which has been paying a market-leading farmgate price since September – this week said its rivals had been paying between 2p and 4ppl lower than Freshways since October, making the cut “inevitable”.
“On our milk volumes this means we have paid in the region of £2m more to our farmers over the last three months than our competitors have done,” said Medina Fresways joint-MD Bali Nijjar.
This, combined with falls in cream prices of as much as 25% since September, plus “very high” milk volumes, meant Freshways was “at risk of some of our markets being undermined by competitors, who are not paying as much for milk as we have done”, said Medina Freshways joint-MD Bali Nijjar, in a letter to milk producers.
Farmgate prices have been rising solidly for more than a year, with Defra’s UK ‘all milk’ average farmgate price cliimbing by 54.6% to an all-time high of 48.80ppl in the year to September, in response to tight supplies and soaring input costs.
“While we are not prepared to chase unprofitable contracts, we can’t afford to lose too many as it affects the efficiency of our whole business, and undermines your milk price,” he added, in an attempt to justify the need for a price cut.
Amid soaring on-farm costs, Freshways hoped it could hold its 47ppl price for the first quarter of 2023.
However, Nijjar warned this would depend on December and January cream prices and the actions of rivals.