Freshways cuts December milk price by 7p per litre to 29.4p

The reduction follows two increases by Freshways: 3p per litre from September 1st and another 6p from October 1st. Managing director Bali Nijjar said the processor had been unable to recover those additional payments through its selling prices. Competition in liquid milk had also cost the company sales volume, he said, increasing the processing and delivery costs attached to each remaining litre.

Nijjar said attempting to charge customers more under current market conditions could lead to further volume losses. That would, in turn, limit how much milk Freshways could sustainably buy from its supplying farms, he said. He cited AHDB figures showing that milk supply remained in shortfall during September, although the gap had narrowed compared with August.

Meanwhile, dairy commodity prices have declined. Bulk cream fell by 11% between September and October. Butter prices dropped 7% in October, leaving them 29% below their level a year earlier. Nijjar said these conditions meant demand for cream used in butter production was weak, and he saw little prospect of a near-term improvement in demand for milk fat.

Susie Stannard, AHDB’s lead dairy analyst, said Freshways had raised its milk price too far. More gradual adjustments were generally easier for those affected to manage, she said. She also warned that a large reduction by one processor could prompt others to make similar moves. Stannard described the conditions facing both farmers and processors as difficult: businesses needed to maintain incoming milk supplies, while commodity returns were insufficient to support some of the milk-price increases they had needed to introduce. This was putting margins under pressure throughout the market, she said.

Stannard highlighted rising American production as another factor affecting prices. The United States had previously exported relatively little dairy product, she said, but now exported around 17%. In her assessment, those additional supplies were constraining the level that global prices could reach.

Harvey described Freshways’ decision as deeply disappointing, citing drought, bluetongue and environmental schemes among the issues confronting dairy farmers. Producers needed confidence to make plans, invest and expand their businesses, he said, arguing that abrupt, sizeable cuts in milk payments weakened that confidence. He called on participants throughout the supply chain to support the resilience of farming businesses at what he described as a critical point for the sector.