UK dairy farmers reel as Freshways and Arla cut milk prices

Freshways will cut the price it pays farmers for liquid milk by 7p a litre from 1 December, leaving the rate at 29.4p a litre. The processor pointed to weaker dairy markets and said poor returns on liquid milk were squeezing processors. The reduction almost erases the combined 9p a litre Freshways added over the previous two months to support farmers after the hot, dry summer.

Arla Foods also trimmed its standard milk price for November, taking off 0.45p a litre and leaving it at 40.41p a litre. Its organic milk price stayed at 58.25p a litre. The cooperative said global milk supplies were stabilising at a high level, while the whey protein market had slipped slightly from record highs.

UK producers were already struggling before the latest cuts. A year of volatile farmgate prices, the summer drought and soaring fuel and fertiliser costs tied to the conflict in Iran had left many selling milk below the cost of production. Ian Harvey, who milks 160 Holstein cows and some Ayrshires in north Cornwall, said confidence is at rock bottom. 'It’s shaken us to the core,' said Harvey, who chairs the NFU’s dairy board.

The NFU described the Freshways cut as hugely disappointing. Dairy analyst Chris Walkland said the size of the move surprised producers and analysts, particularly because other processors making cheddar and mozzarella have held their prices. Freshways is fiercely competitive when milk volumes are high, Walkland said, according to the Guardian.

The price cut lands after a strong autumn for milk production in the UK and Europe helped create a global oversupply. This summer’s drought also failed to reduce volumes as much as expected, because farmers fed cows when grass stopped growing. Farmers often have little say over who collects their milk or what they are paid. Some large supermarkets, including Tesco and Sainsbury’s, pay farmers based on production costs, but those arrangements are not open to all.

Retail prices have moved too: Tesco, Sainsbury’s, Morrisons and Asda raised the price of a four-pint bottle by 10p in recent months, now at £1.75, or just under 44p a pint and 77p a litre. Walkland said retailers look after their liquid milk suppliers well, but cheese and butter suppliers are not looked after to nearly the same degree.