dairy cow

The price cuts come amid an ‘uncertain’ economic outlook, according to processors

Müller, Arla, Freshways and First Milk have all announced further cuts to their farmgate milk prices this week, citing increased production and falling demand.

Freshways will cut its April milk price by 3p per litre to 41ppl – representing a drop of 18% on the market-leading 50ppl price it paid to farmers as recently as December.

The mid-market processor said it had no choice “but to defend our position from a sales perspective”, with falling commodity dairy fat prices also a factor in its price cut.

Its comments were echoed by Müller, which is cutting its April price by 0.5ppl to 42.5ppl for Müller Advantage farmers, and cited “supply ahead of forecast”, while Arla is cutting its March price by 3.52ppl to 44.95ppl and 49.73ppl for conventional and organic milk respectively amid an “uncertain” economic outlook.

Elsewhere, cheesemaker First Milk will cut its price by 3ppl to 42.69ppl for April.

The dairy co-op’s farmer director Robert Craig said there remained “a significant disjoint between market prices and current farmgate milk prices”. And as a result, “we must adjust our milk price to reflect the market returns”, he added.

The latest batch of price cuts should push market prices significantly down on Defra’s 51.51ppl UK average for December – the most recent official market average available.

But with the average cost of production sitting around 44ppl, according to Kite Consulting, the cuts could soon prove to make production uneconomical for some dairy farmers, which could then drive shortages of dairy products by the second half of 2023.

Farmgate milk prices plunge by 12% in just one month