Milk prices rose by more than 2p/litre at United Dairy Farmers' latest auction, with poor weather slashing milk production across the UK and Ireland.
The auction sold 38m litres of milk for August delivery – 11% less than the same time last year. Prices averaged 25.04p/litre – up from 22.98p last month but well below the 29.51p/litre achieved in July 2011.
"This increase in auction prices will be welcome news to all dairy farmers," said chief executive David Dobbin. "However, we recognise that further price increases are needed so that farmers can cover their costs."
The improvement in price was mainly driven by a growing shortfall in domestic milk supplies, he added. "International dairy markets are still fragile, with a very weak euro putting downwards pressure on returns in sterling. However, a combination of drought in the US and Russia, high feed costs and very wet weather in north-west Europe is starting to impact on global milk supply.
"Providing there are no unforeseen circumstances, we expect to see auction prices edge up in the months ahead as local milk supplies reduce further."