UK dairy processors are finding it extremely difficult to find markets for milk and cheese this spring, due to the increase in European production.
Figures from the Milk Market Observatory (MMO) show that milk deliveries in Europe jumped by 2.5% in 2015 on 2014 levels, while UK output rose by 2.5%.
However, many dairy processors have claimed that the extra milk on the market is forcing them to cut the farm-gate milk price paid to farmers.
Lyndsay Chapman, Agriculture Director of Muller Milk and Ingredients said that supply is substantially out of line with demand.
There are no winners in the dairy supply chain.
“Market returns are depressed and milk production forecasts for April suggest the months ahead are going to be very challenging for us all,” she said.
Chapman said that supply and demand is a major determinant of milk price and at the moment there is a significant imbalance which is having a severe effect on the value of farm-gate milk.
As a result of the market difficulties, Muller has decided to cut its standard milk price by 1.35p/L (1.7c/L) from April 1.
This means that producers supplying Muller Direct Milk will receive 19.34p/L (24.91c/L), while farmers in the Muller Milk Group will receive 20p/L (25.76c/L) for their milk.
Paul Flanagan, First Milk’s external Relations and Membership Director said that the continued weak market in March and a plentiful supply of milk has impacted on the pricing mechanism for cheese.
“Therefore we need to cut prices for those milk pools which are linked to cheese manufacture,” he said.
First Milk has dropped its March milk price by 0.6p/L (0.77c/L) for milk in the Northern England pool and 0.42p/L (0.55c/L) for Scottish milk.
Additionally, Ash Amirahmadi, Head of Milk and Member Services at Arla Foods UK, said that the ongoing imbalance between milk supply and demand is putting continued pressure on farmers.
The significant increase in production across northern Europe is resulting in higher cheese and ingredients stocks, resulting in sustained downward pressure on the markets.
But despite market pressure, Arla are holding its on-account March milk price at 21.81p/L (28.15c/L).