Milk price rises may be tempered by supply recovery

The recent recovery in milk prices is continuing, with a number of major processors announcing further increases in payments to producers, as supply and demand achieve a better balance.

Arla, for example, will be paying an additional 1.76p/litre for October deliveries, taking its average price for standard 4% butterfat, 3.3% protein milk to 39.17p/litre.

See also: Milk costs report shows record yields in challenging year

This is the fourth month in a row that Arla has raised prices, over which period co-op members have received almost 5p/litre more.

“Global milk supplies have stabilised at a high level and overall, there is a better balance in commodity prices,” said a statement. “The outlook for conventional and organic is stable.”

Muller has also announced another increase – in its case a 0.5p/litre rise for November deliveries, taking its Muller Advantage price to 37.5p/litre.

This is the third increase in a row, resulting in a 3p/litre uplift since August.

Richard Collins, agriculture director at Muller said: “We recognise the pressures facing our supplying farmers and maintaining a competitive milk price remains a key priority.

“We will continue to assess market conditions, monitoring supply and demand closely.”

Some prices on hold

Not everyone has been so bullish however.

First Milk, for example, has decided to hold its price steady for November, leaving a standard manufacturing litre at 39p, including a member premium.

This follows the 6.15p/litre increases it fed through for September and October deliveries.

Barbers Cheesemakers is also holding its price steady after three consecutive increases at 40.11p for a 4.2% butterfat, 3.4% protein manufacturing litre.

Even though milk supplies remain tight in the UK, head of supply operations Michael Masters points to the continuing surplus of milk deliveries in continental Europe which has been weighing down on markets.

“Germany, the EU’s largest milk producer at almost twice the size of the UK, has been running about 5% ahead of last year throughout 2026,” he said.

Output recovery

Whether the steam is running out of the UK milk market remains to be seen.

There are signs that output is recovering, with the return of grass growth this autumn and the onset of autumn calving in some herds.

For example, GB milk deliveries reached 33.02m litres/day in the week ending 19 September, a 1.5% increase week-on-week.

However, milk supplies are still running at a 3.7% year-on-year deficit, according to AHDB figures.

“Our data shows that we’re still short of milk in GB,” said Susie Stannard, lead dairy analyst at the AHDB. “There’s also still the potential for bluetongue to play a role [in limiting supplies].”

UK dairy commodity prices have also strengthened, with butter up 3% to £3,540/t in September, skimmed milk powder up 11% to £2,730/t, and mild cheddar up 9% to £3,330/t.

“The big driver that is keeping things positive is consumer demand for protein, with sales of cottage cheese and Greek yoghurt keeping strong,” said Ms Stannard.

Butter is still in oversupply, but cheddar stocks are balanced more finely, she added.

Global pressure

But globally, markets remain under pressure.

“The US has become a powerhouse, from exporting very little of its milk to about 17% of its total output – it’s really undercutting the rest of the world’s prices,” said Ms Stannard.

“My broad outlook is fairly bearish in terms of domestic milk supplies; hopefully that might give some support to farmgate milk prices.

“But it needs to be underpinned by commodity values in the long term. I don’t think we should expect to see milk prices coming up to what they were.”