Losses build for dairy producers after further price cuts
© Tim Scrivener Farmgate milk price cuts by a number of processors, including Muller, First Milk, and Freshways, have put further pressure on producers who are facing financial constraints.
Many dairy producers are already in a loss-making position, with consultants warning that costs of production continue to outstrip farmgate prices.
This is driving more producers to look at cutting back milk output or even leave the sector entirely.
See also: UFU demands fair deal on milk prices
One consultant told Farmers Weekly that many producers are starting to face cashflow problems on farm, but it isn’t just low milk prices causing some to consider leaving.
Lack of labour, no succession plan, higher rents and interest rates, and tougher compliance regulations are also playing a role.
Despite higher outputs earlier in the year, the latest industry estimates forecast GB milk production to decline by 0.5% during the 2023-24 milk year.
Susie Stannard, AHDB lead dairy analyst, said: “There will be little incentive for farmers to push cows, and herd reductions could be made to boost cashflows later in the autumn and winter.
“Therefore, we expect that milkflow will begin to dwindle steadily in the short term, with potential for some bigger reductions in the early part of 2024.”
Wholesale markets
UK dairy commodities showed some early signs of recovery during September, with butter prices up by £30/t on the month and cream up £25/t.
However, mild cheddar prices dropped £70/t on the month to average £3,260/t.
Looking at global markets, the past three fortnightly Global Dairy Trade (GDT) auctions have made gains.
The GDT price index increased by 4.4% on 3 October to average US$3,104/t (£2,559/t), with big increases for both skimmed and whole milk powder.
Meanwhile, in the EU, Nick Holt-Martyn of The Dairy Group said commodity markets have shown increases of between 0.2% and 9.4% in the past four weeks.
He said: “The recent price cuts at the farmgate seen in the UK will hopefully be the last of this particular part of the cycle.”
Farmgate milk price cuts
First Milk will reduce its November price by 0.85p/litre to 36p/litre for a manufacturing litre.
Robert Craig, First Milk vice-chairman and farmer director, said: “Dairy demand has been reduced for several months, putting downward pressure on pricing, which has affected our returns. As always, we will continue to work hard to maximise our members’ milk price in the months ahead.”
Muller will cut its farmgate price by 0.5p/litre to 36.5p/litre in November for a liquid litre.
Richard Collins, Muller’s head of agriculture, said: “While we remain committed as ever to paying our supplying farmers a competitive milk price and ensuring security of supply, we have to respond to continued market pressures and supply remaining ahead of forecast.”
Freshways will reduce its price by 1p/litre to 35p/litre in November 2023 for a liquid litre.
Barber’s Cheesemakers will hold its milk price at 36.14p/litre in November, based on a manufacturing litre.
Arla has committed to holding its milk price at 35.21p/litre during October for a manufacturing litre.