Milk bottles© OJO Images/REX

Dairy co-op First Milk has dropped the low prices paid to farmers even lower.

The processor wrote to its 1,200 members on Friday (31 July) telling them their A milk price would fall another 0.5p/litre from 1 August.

The blow will be slightly softened as the capital contribution paid to the co-op – extra money that comes off the milk cheque – drops back from 2p/litre to half a penny.

But farmers in each of First Milk’s seven supply groups will now be paid less than 20p/litre for their A milk – defined as 80% of a farm’s average production in that month for the past two years.

See also: First Milk chairman resigns from co-op

The price for B milk above that level has not been confirmed for July or August – though it will mean farmers’ payments will be even lower.

First Milk’s A prices will now range from 18.1p/litre for the Midlands and East Wales pool, up to 19.67p/litre for Lake District and Haverfordwest producers.

Co-op chairman Sir Jim Paice, who announced his retirement in June after a brutal year that also saw his chief executive step down, said in a letter to farmers that market returns continued to fall.

“Despite the recent price reductions we have seen around the world, production continues to grow strongly in a number of key producing countries, while global demand remains comparatively weak,” he said.

“Unfortunately we must reflect that in returns we pass back to you.”

First Milk’s news follows a series of summer price cuts from big and small milk buyers.

Arla farmers will be paid just 23.01p/litre in August, while Dairy Crest has dropped its liquid price to 21.69p/litre from September.

Supplies are running high in the UK and around the world.

British milk production is still up 2% on the year and 7.7% above the three-year average.

Wholesale dairy product markets continued to slide in July, under pressure from plentiful milk and the weakness of the euro.

Bulk cream values fell 10% on the month to £900/t, while butter was down 5%, skim milk powder 4% and mild cheddar 3%.

Industry eyes will be on the next sale of the world benchmark Global Dairy Trade Auction, set for Tuesday (4 August).