FIRST Milk, the farmer-owned business with about 2,700 members in Scotland, England and Wales, is to reduce the price paid to dairy farmers by 1.25p per litre, as from 1 January.
The news does not come as a total surprise, but it will have a significant impact on margins.
Peter Humphreys, chief executive of First Milk, said: "The economic environment has changed significantly over the past few months. Likewise conditions i
n the global dairy market, which drove UK milk prices upwards in 2007 and 2008, have now deteriorated markedly. Milk prices in mainland Europe have declined over the past few months and this is now having an impact on the UK. As a consequence the board of First Milk has reluctantly decided that we must cut our milk price."
The big concern for farmers is that there may now be a succession of price cuts by the big buyers. Arla announced last week it was to implement a reduction of 2p per litre as from yesterday. However, Robert Wiseman, Dairy Crest and Milk Link are reported to be optimistic that they can hold current prices until the end of this month, but the pressure is now on.
Humphreys added: "First Milk is not alone in facing this market volatility. Over the last six months we have shown flexibility to reshape our business in line with market conditions.
"We have strengthened relationships with our fresh milk processing customers, and on the cheese side we are focused on growing our brands and retaining and securing premium retailer contracts."
