Dairy Crest is to cut the amount it pays farmers supplying milk for the liquid market by 0.5p/litre from1 April.
Arthur Reeves, Dairy Crest’s milk purchasing director, blamed the fall on continuing weakness in commodity prices, particularly cream.
“The reduction takes into account the overall fall in values from last September to February this year,” he added.
The company last cut its liquid price in November, by 0.275p/litre.
The standard litre price for Dairy Crest’s liquid agreement now stands at 18.26p for a producer averaging 2201 litres a day on every-other-day collection.
The move follows recent price cuts by Arla Foods and Robert Wiseman Dairies.
Mr Reeves said he was exploring ways to offer more stable pricing to milk suppliers.
“A lot of our farmer suppliers thought that fixing prices over the past five months was a good idea.
I want to fix it for longer next time – six months would be good, a year would be fantastic.”
But April was not the best time to fix prices, for several reasons, he added.
Recent changes in retail prices made it hard for customers to commit to stability; milk was still being sold too cheaply into the middle ground;
no competitors had announced their April milk payments and farmers were under pressure and might not wish to fix at today’s levels.
“Several of our farmers have said the current price is below the cost of production, which for many is around 19p/litre.
We are talking to everyone about stability, but we need to let the market settle down a bit before drawing these discussions to a conclusion,” Mr Reeves said.
The price paid to farmers supplying Dairy Crest’s cheese factories will remain unchanged, though the value of milk for commodity cheese was cut by 0.5p/litre from the beginning of this month.
But Mr Reeves said he was becoming concerned by the rising level of the UK’s cheese stocks.
Richard Weaver, chairman of farmer supply group Dairy Crest Direct, said producers were disappointed at the cut.
“But the reasons behind it were clear, and the calculations were transparent,” he said.
“You can’t argue that intervention support for fats has fallen.
“But producers’ costs are rising all the time, and we need to look further down the supply chain to increase returns.
Retailers have given a lot of money away by cutting their on-the-shelf prices.
But it remains to be seen how long they stick and if they increase we will ask for some of that money.”
None of the other main milk buyers had announced their April prices as Farmers Weekly went to press.