Large milk price cuts intensify pressure on dairy farmers

Dairy farmers face another month of significant farmgate price cuts as wholesale markets continue to fall and processors feel the pinch. 

Many producers will receive about 7-10p/litre less during March than they would have at the start of the year.

This will cause some farm businesses to make a loss, with industry cost-of-production estimates putting the average at about 43-45p/litre.

Additional milk supply continues to weigh on prices, with UK daily deliveries during February up more than 3% compared with the same month last year. 

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Both milk market indicators also fell again during February. The actual milk price equivalent (Ampe) dropped 5% to 33.5p/litre, and the milk for cheese value equivalent (MCVE) fell 11% to 39.5p/litre.

Michael Masters, head of milk supply at Barbers Cheesemakers, told Farmers Weekly wholesale markets were falling fast, with most cheddar prices having lost £1,000/t since the peak last year.

He said milk prices rose by 15-16p/litre last year on the back of a 1.5% reduction in production, so it was little wonder that higher output this year – estimated at 3.8% above last year’s levels – is having a significant effect now.

However, there were some signs of improvement, he added. “The fact that dairy futures have gained a couple of pence in the past month shows the market has stopped falling, which is fantastic news, as long as it can be built upon,” he said.

Global dairy markets have been more varied, with wholesale values rising by 3.2% on 7 February before falling 1.5% at the latest fortnightly Global Dairy Trade event on 21 February.

Latest processor cuts in detail

Standard manufacturing litre (4.2% butterfat and 3.4% protein)

Barbers Cheesemakers is due to make a price cut of 3.9p/litre to 42.19p/litre from 1 April.

Producers supplying Freshways will receive 41p/litre in April – a 3p/litre reduction, following on from a 3p/litre cut in March.

First Milk will also reduce its milk price by 3p/litre from 1 April, taking it to 42.69p/litre, including its member premium and regenerative farming bonus.

Robert Craig, First Milk farmer director and vice-chairman, said that, while dairy markets have stabilised a little in recent weeks, there remains a significant disconnect between market prices and current farmgate milk prices.

Arla will pay a March price of 44.95p/litre – a 3.5p/litre reduction on the previous month.

Arla Foods amba board director Arthur Fearnall said: “Consumer demand continues to fall as a result of consistently high inflation and the uncertain economic outlook.

“Additional milk volumes are driving a continued decrease in commodity prices, and the prices for EU and world commodities are now, broadly, on par.”

Standard liquid litre (4% butterfat and 3.3% protein)

The farmgate milk price for Muller will drop by a further 1.5p/litre in April to 42.5p/litre, including its advantage bonus.

This will be the third consecutive monthly decline and equates to a 5.5p/litre drop since January.

Richard Collins, Muller head of agriculture, said: “As we work to ensure security of supply for the millions of shoppers who buy the dairy products we make every day, we are continuing to face into market pressures, and supply is ahead of forecast.”