Farmgate milk prices have been slashed by major processors for the second month in a row due to a “significant oversupply”.
Freshways, Arla and Müller have announced cuts to the price they pay farmers over the past week, with reductions of between 1.5p and 2p per litre.
This is the second month of price cuts in a row, with “immense pressure” on the dairy markets due to the supply situation, “weakening returns” for the dairy sector, according to Freshways MD Bali Nijjar.
“We understand the impact this has on your business and livelihoods, and we assure you this decision was not taken lightly,” said Nijjar in a letter to Freshways milk suppliers. “We sincerely hope this will be the final cut,” he added. “However, unless market conditions improve particularly through reduced production and increased demand – further adjustments may be unavoidable.”
Spot milk prices had fallen to levels “never seen before at this time of year”, Nijjar explained, with a decline in cream prices traded on global commodity markets also putting downward pressure on spot pricing.
Freshways is now paying farmers 34ppl, while Arla has reduced its rates to 40.95ppl.
Müller Milk & Ingredients, which has cut its price to 40ppl, emphasised that it would “pay a competitive and stable milk price”.
While the average farmgate price for September 2025 was announced by Defra as being 46.54ppl, the average is now 36ppl when taking the recent cuts into consideration, according to Kite Consulting.
John Allen, director of Kite, said this was all part of a “correction” in the market to stop an oversupply of milk crashing the market further down the line.
According to him, the liquid milk market would likely be held at around 40ppl on farm to provide more stability at farm level.
“Liquid milk has separated itself from the commodity market and it is now sold very effectively to the retailers who need that stability and they need to invest in their sustainability,” he added.
The NFU has warned that these falling numbers will cause “financial distress” for farming families, “with confidence already rock bottom due to the impact of a dry summer, the family farm tax and uncertainty over environmental schemes”.
“The dairy supply chain depends on farmers being able to plan and invest,” said NFU dairy board chair Paul Tompkins. ”That’s why it’s so important producers have clarity over how their milk price is calculated and can understand any adjustments.
“Under the new fair dealing regulations, all milk contracts must clearly set out the factors used to determine milk prices.”
Read more: Farmgate milk prices fall as production hits highest point in a decade
This comes as many lines in the major multiples have risen in the last month, with some lines as much as 14.3% more expensive than they were at the start of October.
At Sainsbury’s, Graham’s two-litre milk lines and Yeo Valley one-litre SKUs increased by 14.3% and 8.1% respectively.
Meanwhile, several mults increased their own-label milk price from £1.65 to £1.75 for four pints, an increase of 6% from the end of September and during October.
There is understood to be a lag in the farmgate price reaching retail shelves, and Morrisons and Lidl have now brought the price back down to £1.65.
M&S said its price paid to farmers was not dependent on farmgate prices as it used its own milk pool of 40 farmers.
Co-op also increased its own-label milk price from £1.75 to £1.85 for four pints, representing a monthly hike of 5.7%. However, the retailer said that it was keeping The Co-op member price at £1.65 and that it had increased payments to farmers to be 43.21ppl.
“Retailers are committed to balancing rising costs of production, while offering competitively priced products to their customers and paying farmers a fair price,” said a BRC spokesperson.
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