Domestic dairy commodity prices dropped sharply in September, following the weaker global and European trend.

“Prices for all dairy products declined as buyer demand remained weak relative to supply,” said a report by DairyCo.

“Strengthening sterling is adding further pressure to UK prices as they move to stay competitive with the Continent.”

Cream prices – supported slightly by reduced milk butterfat contents – lost £80/t, to £1,120/t. Butter values fell by 10%, to £2,375/t, with some manufacturers using private storage aid to manage stocks rather than discounting on the open market.

And skimmed milk powder markets dropped by 12.5%, to £1,750/t, as milk was diverted from cheese production to powders.

Despite limited trade of UK cheddar, weaker mild cheddar prices from the USA and EU had led to a £200/t drop in domestic values to £2,750/t, said the report.

Based on butter and powder markets, DairyCo’s Actual Milk Price Equivalent fell by 14% on the month to an average of 23.5p/litre – 16.4p below the same time last year and the lowest since summer 2012. The Milk for Cheese Value Equivalent lost 7.5%, to 28.9p/litre.