First Milk has confirmed to that it will be cutting the price paid for both its liquid and manufacturing milk pools by 3p/L from October 1. This will bring its liquid pool base price down to 25.1p/L.

The equivalent price for manufacturing milk will be reduced to 26.1p/L. The company, which is 100% farmer owned, is citing the sharp decline in market prices as the reason for this more than significant drop in producer returns.

First Milk Chairman Sir Jim Paice MP said that global and European dairy markets have been falling since early spring, in some cases by almost 50%. “Despite us making a number of price reductions since June, market prices for our core products have declined further and faster than our price cuts. We are well aware of the impact that this price cut will have on our members’ cash flow, but this latest move means that we now have our milk prices in line with our projected market returns.”

He also said that the reasons for falling market returns are well documented and while milk production here in the UK and in key milk producing regions like New Zealand and the US are well up year-on-year, demand from main importing markets has dropped back, and on top of that we now have Russia banning dairy imports from the EU. “Given that most of our milk is manufactured into products like skimmed milk powder, cheese, butter and cream, which are traded globally, we are impacted directly or indirectly by all these market factors.

“Against this backdrop, we are taking actions in the business across a number of areas, although admittedly these have a limited impact in the face of such huge market drops. For example, we are maximising milk going into higher performing markets, winning increased listings for our added value brands, and taking costs out of every corner of our business.”