Müller has announced it will lower the farmgate milk price paid to its 700 Müller Direct farmers by 1.5ppl to 29.00ppl from January 2018.
The price reduction marks the end of a sustained period of price rises by the dairy giant and the wider dairy sector, amid tightened dairy commodity supplies.
However, the new price point remains significantly higher than Defra’s 2016 UK average price of 22.57ppl and will be higher than the 26.95ppl market average seen in January 2017.
“Substantial movement in butter and cream values is now familiar in global dairy commodity markets,” said Müller agriculture director Rob Hutchison.
“We are disappointed to see this sharp decline, but the portfolio of added-value dairy products we make in the UK will shield farmers from the full volatility of global dairy markets. We will continue to offer a stable and competitive milk price at each point in the market cycle.”
It follows announcements by Arla and First Milk that they were holding their prices for December amid a softening in the market, which had been on the cards for months according to dairy industry expert John Allen of Kite Consulting, who predicted challenging times for dairy farmers in 2018.
“After the high prices seen this year, we expect some kind of market correction, and the scale should not come as a shock given falls in the global dairy market,” he said. “Lower prices are often absorbed in the supply chain, with retail pricing unlikely to shift.”
He added that other dairy companies are likely to follow in lowering the prices paid to farmers, it’s just a question of “when, who and how much”.
The cut comes after a 25% fall in UK commodity values of bulk cream and butter since September [AHDB UK Wholesale Prices]. While Fonterra’s Global Dairy Trade price index fell for the fourth time on 21 November to $2,970 per tonne amid falling demand in the Asian market and a surplus produced in Europe.
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