A wave of farmgate milk price increases will sweep through UK dairy next month as constrained milk supply continues to fuel upward pressure on prices.

Average UK farmgate milk prices stood at 31.37ppl in July, 19.2% higher than July last year and 1.9% higher than in June 2013 as tighter milk supply caused by this year’s erratic weather took its toll on production volumes [DairyCo].

UK milk production last month was actually up by 4.9% year on year but cumulatively, production in the 2013/2014 year is down on the previous year by 39 million litres, or 0.7% to 5,781 million litres.

As production moves further away from its seasonal peak in the spring and volume continues to decline, this week Müller Wiseman announced it will increase its standard farmgate milk price by 1 pence per litre to 32.5ppl from 21 October.

Müller said the increased price reflected continuing pressure on UK milk supplies against a backdrop of strengthening global dairy commodities. “As we enter the autumn and winter months it is important to act in order to ensure we can secure the milk required to meet our customers’ requirements,” said supply chain planning director Martin Armstrong.

Last week Sainsbury’s announced a 1.97ppl increase in its farmers’ price to 34.15ppl to apply from 1 October. The Sainsbury’s price is linked to key input costs comprising animal feed, fuel and fertiliser.

Wiseman announced earlier this month that dairy farmers on its Müller Wiseman Formula contract - linked to global commodity market returns - would receive a 2.28ppl increase (on the formula’s July launch price), to 34.55pl from October to the end of the year.

And Dairy Crest’s Formula milk price - which takes into account factors such as the price of cream - will rise by 0.153ppl to 32.082ppl on 1 October.

The wholesale price of cream rose by £30/tonne in August, versus July prices, to £1,720/tonne.

All eyes are now on Tesco as the market awaits its next farmgate milk price announcement, to apply from November.