UK dairy sector hit by further milk price cuts from major processors

Confidence within the United Kingdom’s dairy farming community has deteriorated sharply following recent announcements by two major milk processors to reduce the prices paid to producers. Freshways, a significant supplier of liquid milk to retail and hospitality sectors, has confirmed it will lower the price it pays for milk by seven pence per litre from 1 December. This reduction brings the farmgate price down to 29.4p per litre. The move has been described by sector leaders as a severe blow to an industry already grappling with volatile market conditions and rising input costs.

The decision by Freshways effectively negates the combined nine pence per litre in price increases that the company had introduced over the previous two months. Those earlier adjustments were intended to support farmers following a hot and dry summer that impacted agricultural output. Bali Nijjar, the managing director of Freshways, stated that anticipated improvements in dairy markets had failed to materialise. Instead, the company faces rising operational costs and weaker market conditions, which are squeezing margins for processors. The company cited these factors as the primary drivers for the significant price reduction.

Simultaneously, Arla Foods, one of the three largest processors in the UK alongside Müller and First Milk, announced a more modest adjustment to its pricing structure. The dairy cooperative will reduce its standard milk price by 0.45p per litre in November, setting the new rate at 40.41p per litre. Arla maintained its organic milk price unchanged at 58.25p per litre. The company attributed the standard price cut to global milk supplies stabilising at elevated levels. It noted that while the whey protein market had recently experienced a surge in demand due to trends in weight loss and protein intake, the broader market environment remains challenging.

Ian Harvey, chair of the National Farmers’ Union’s dairy board, described the current state of the sector as being at rock bottom. He warned that milk is frequently leaving farms at a loss, a situation exacerbated by a year of volatile farmgate prices. The financial pressure on producers is compounded by soaring costs for vital inputs such as fuel and fertiliser, which have been driven up by the impact of the conflict in Iran. Harvey, who manages a family farm in north Cornwall milking a herd of 160 Holstein and Ayrshire cows, noted that while his own operation is insulated from these specific cuts due to local cheese processing, many of his colleagues are not so fortunate.

The scale of the Freshways reduction has surprised both producers and sector analysts. Chris Walkland, a dairy market analyst, observed that the cut occurred at a time when other processors, including those specialising in cheddar and mozzarella, had held their prices steady. Walkland suggested that understanding the current price drops requires looking back to August 2025, when positive milk production in the UK and Europe contributed to a global oversupply. Additionally, milk volumes did not decline as much as expected during the summer drought, as farmers used animal feed to maintain production levels when grass growth stalled.

Farmers in the liquid milk sector often have limited ability to switch processors or negotiate prices, creating a rigid market structure. While some major supermarkets, including Tesco and Sainsbury’s, have committed to paying farmers based on production costs, these arrangements are not universally accessible. The retail sector has also seen price adjustments, with Tesco, Sainsbury’s, Morrisons and Asda increasing the price of a four-pint bottle of milk by 10p to £1.75 in recent months. This equates to just under 44p per pint, or 77p per litre. Despite these retail price increases, the margins for farmers remain tight, with analysts noting that suppliers producing cheese and butter for retailers are often less well supported than those supplying liquid milk.