First Milk and Dairy Crest have announced further reductions in their farmgate milk prices as the Russian trade embargo exacerbates pressure on the global dairy markets.

The price First Milk pays for both its liquid and manufacturing pools is being slashed by 3ppl from 1 October to 25.1ppl for liquid and 26.1ppl for manufacturing. Meanwhile, Dairy Crest is reducing the price it pays to farmers on standard liquid and Davidstow contracts by 1.75ppl from 1 October, bringing the liquid milk price down to 28.34 ppl and Davidstow price to 30.34ppl.

First Milk chairman Sir Jim Paice said despite introducing a number of price reductions since June, market prices for its core products had declined ”further and faster than our price cuts”.

”We are well aware of the impact that this price cut will have on our members’ cash flow, but this latest move means we now have our milk prices in line with our projected market returns,” he added. ”Demand from main importing markets has dropped back, and on top of that we now have Russia banning dairy imports from the EU. Given that most of our milk is manufactured into products like skimmed milk powder, cheese, butter and cream, which are traded globally, we are impacted directly or indirectly by all these market factors.”

Dairy Crest group procurement director Mike Sheldon said a 17% reduction in the global dairy trade auction price between July and August meant prices were now some 50% down from their peak at the start of 2014.

At the same time, UK cream prices had fallen back by 15% over the past month alone, while cheese stocks were at record high levels.

“As has been widely reported, global dairy markets have fallen dramatically and at an unprecedented speed and level over the past few weeks,” he said. “Unfortunately we have had to reflect this within our milk prices for October. I understand that this reduction will be really disappointing news for our farmers.  However, having discussed our position at length with Dairy Crest Direct (which represents the 1,100 farmers who sell their milk direct to the company), they recognise the severity of the situation.”

The latest fall in milk prices from Dairy crest follows Arla’s reduction to 30.38p from 1 September, and continued militancy from the farming community.

Last week, protest group Farmers for Action (FFA) said it was seeking a mandate to start planning protest action over the cuts. “If we do nothing, more cuts are predicted,” warned FFA chairman David Handley.