Milk prices are coming under further pressure after the UK’s largest cheese maker said it would cut prices in March, and news that a major liquid processor is also likely to slash payments soon.

Dairy Crest said the price it paid for milk used in the manufacture of commodity cheeses at its Haverfordwest and Aspatria creameries would fall by 0.5p/litre from the beginning of next month.

Suppliers to its Davidstow plant, which produces higher-value brands like Cathedral City, will be unaffected.

The firm’s milk purchasing director Arthur Reeves said falling commodity prices and an unsustainable price gap over its competitors were to blame.

“Last summer Dairy Crest increased its price by 0.8p/litre, extending our lead at the top of the milk price league of cheese manufacturers to over 1.5p/litre.

“We then said that we expected our competitors to follow our lead but, even allowing for some time to elapse, this simply hasn’t materialised.”

Mr Reeves said falling cream and butter prices were affecting the commodity end of the cheese market and this could be further exacerbated if more milk was switched into cheese manufacture by Irish dairy farmers during their spring flush.

Richard Clothier, managing director of Wyke Farms, the UK’s largest independent cheese maker, agreed that there was intense competition towards the lower end of the market.

“We’ve certainly seen pressure from some independent businesses we supply where we’ve been undercut.”

Further intervention price cuts for dairy commodities, timetabled for July, would not help either, he added.

Dairy co-ops Dairy Farmers of Britain and Milk Link said it was not possible to compare their milk prices against Dairy Crest’s because they paid a pool price to all of their suppliers, regardless of where the milk went.

A Milk Link spokesman said cheese was doing well for the firm but he was concerned what signal Dairy Crest’s move would send to the market.

There is also further bad news on the horizon for farmers supplying the liquid market, with Robert Wiseman Dairies widely predicted to announce a cut of around 0.8p/litre for March milk.

A spokesman for the firm refused to confirm the decrease as Farmers Weekly went to press, saying it would be wrong to do so before its suppliers were consulted at a meeting on 23 February.

However, he emphasised it was not a secret that Wiseman felt it was paying far more than its competitors, even before Arla Foods’ recent 0.9p/litre cut.

“It doesn’t take a genius to work out there has to be a correction.”

If Wiseman does cut, it is feared that Arla might be forced into making another reduction when its current price expires at the end of March.

But Jonathan Ovens, chairman of the Arla Foods Milk Partnership that supplies most of Arla’s milk, said that would not happen following the introduction of a new pricing scheme.

“I can categorically say that what Wiseman does will not affect our price going forward from April.”

Our Milk Price Review for January deliveries shows one increase.

Paynes Dairies raised its base price by 0.18p/litre, following its December “one-off” decrease, which was blamed on difficult trading and lack of demand at Christmas.

One firm – Dansco – cut its price, by 0.2p/litre. All other changes reflect seasonality adjustments.

andrew.shirley@rbi.co.uk