Average farmgate milk price needs to rise to at least 32p/litre by 1 January 2013, the Dairy Group has warned.
"The January 2013 farmgate milk price needs to rise by another 10% to ensure there is sufficient production capacity left in April to take advantage of an improved set of weather and market conditions," said Nick Holt-Martyn from the Dairy Group.
"We said last month that processors should get on and pay 29p/litre without prevarication as an absolute minimum. Now we are saying by 1 January 2013 that figure needs to be 32p/litre just to stand still - with market returns almost 30p/litre and rising there will be no excuses."
The July and August milk price cuts and poor summer weather had knocked producer confidence and milk production had dropped due to farmers reducing feed or using lower-quality feed, he added.
"With milk prices rising, processors will hope the declining supply can be arrested, but unfortunately feed costs are only just starting to have an effect on the farm gate; once the high pricec of wheat and protein feeds are seen in the price paid on-farm, then the demand for further price rises will increase."
Market returns were up 1p/litre on last month, and 2.5p/litre since the drop in April this year - for the next six months markets looked set to firm on weaker supply in the northern hemisphere, added Mr Holt-Martyn.
"With feed costs at record levels and feed in short supply, northern hemisphere production would be expected to be decreased for the next 12 months; the result could be sharply rising markets in 2013, which will have to feed back to farmgate prices by the autumn."
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