Freshways fires 6p/litre milk price rise as supplies tighten

Freshways has announced a 6p/litre increase in its milk price from October, taking its standard litre to 38p/litre, as processors respond to falling milk supplies and a strengthening dairy market.

The rise, which will take Freshways’ base price to 36.4p/litre, alongside a 1p/litre sustainability bonus, is one of the strongest moves yet in a market that has been dominated for months by oversupply and falling farmgate returns.

In a letter sent to its dairy farmer suppliers, Freshways’ managing director, Bali Nijjar, said the pressures that drove prices lower earlier this year were now beginning to ease.

See also: Milk prices improve, but outlook remains uncertain

The company pointed to difficult weather conditions, reduced crop and silage availability and the growing threat from bluetongue, alongside improving dairy markets.

Dairy analyst Chris Walkland, of the Walkland Partnership, told Farmers Weekly that the scale of the rise reflected processors waking up to the consequences of tighter supplies.

“The penny is dropping, metaphorically speaking, with processors that if they do not do something significantly with milk prices soon then milk volumes are absolutely going to tank even more than they are doing at the moment.”

He said Freshways – the UK’s third-largest liquid dairy and milk supplier – had also been under pressure from suppliers, having lagged behind some other buyers on price.

“The farmers were becoming increasingly disgruntled at the discrepancy and why they hadn’t moved more before,” he noted.

Freshways’ increase comes as other processors and manufacturers also move prices upwards.

Muller has lifted its September price by 0.5p/litre to 35p/litre, while First Milk has announced a 2p/litre increase for its manufacturing pool.

Wyke Farms and Parkham Farms have also announced October prices at 40p/litre for manufacturing milk.

Mr Walkland expects more movement in the coming weeks.

“I think that by October, we might have four or five cheesemakers on 40p/litre for milk,” he said.

AHDB latest data

The tightening supply picture is supported by the latest AHDB data.

GB milk deliveries were estimated to be 3.2% lower year-on-year in July, with April-to-July supplies around 2% below the same period last year.

The milking herd is also shrinking, while fewer replacements are being registered.

Forage is becoming a particular concern. “A lot of farmers have problems with forage.

“They don’t have any grass and the maize harvest looks terrible,” said Mr Walkland.

Cashflow constraints

Some dairy farmers were already using first-cut silage and he warned that cash constraints could further restrict feed purchases.

“This year, they’ve run out of cash. They don’t have the money to buy feed.

“And that’s going to be another significant driver on volumes going forward.”

Freshways’ move also comes as its new West Bromwich processing facility ramps up production.

The site has been operating since June and secured British Retail Consortium (BRC) accreditation on 10 August, while the company’s Acton plant has closed.

Several buyers are expected to announce revised prices at the end of August, potentially giving a clearer picture of just how far the market has shifted by October.