Milk Link has cut the price it pays its farmer members and direct suppliers by 0.5p/litre from 1 August.
The move takes the co-op’s standard litre price for August to around 23.25p/litre and means prices have fallen by a total of 3.25p/litre since the start of 2009.
In a statement the co-op said weakening returns from cheese sold into the retail and foodservice sectors was to blame – something that had caused other “milk-for-cheese” processors to cut their prices by 0.5-0.83p/litre over recent months.
“Central to the downturn in returns has been a significant increase in imports of ‘cheap’ cheese from, in particular, Ireland and New Zealand, whose imports are 25% and 98% higher respectively in the first five months of the calendar year,” the statement said.
Milk Link also said there had been “unprecedented levels of cut-price branded promotional offers”, with over half of all sales by volume and value on promotion. Consumers were also trading down as the recession continued to hit disposable income and confidence.
Chief executive Neil Kennedy said overall dairy market trading conditions remained weak, but the company was trying to minimise the impact on its members. That was demonstrated by the fact it had held its price for June and July and had cut milk price later and by less than most others in the market, he said.
“However, we fully appreciate the financial effect that any cut will have on our members’ businesses, especially at a time when input costs remain high. As such, we remain focused on continuing to improve our milk price relative to the overall market by taking out costs, harnessing efficiencies and increasing returns where at all possible.”
The reduction will be applied to direct suppliers according to their contractual terms and market returns. The price paid to the 102 former Dairy Farmers of Britain farmers who have accepted a basic dairy commodities contract from 1 July will not be altered to reflect the fact that the price of commodities has remained stable over the last month.