MILK producers have been give the bleak news that two major dairy co-operatives are dropping their prices in the coming months – both Arla and Muller producers will see a drop in their pay packets.

Arla's milk prices will decrease by 2.65p per litre from February, as it warned of an uncertain economic outlook, while Muller's prices for next month will decrease for both conventional and organic milk, to 48.47ppl and 53.25ppl, respectively.

The latter, which is supplied by 3000 UK farmers, warned that consistently high inflation continued to drive a reduction in consumer demand, while Arla added that shoppers were looking to lower their overall grocery spend.

"As consumer demand falls, milk volumes in the commodity market continue to increase, thus pushing commodity prices down further," said Arla Foods director, Arthur Fearnall. "The organic market is also reacting in a similar way, as consumer consumption continues to react to the high inflation, coupled with less demand.

Paul Savage, agriculture director for Arla UK, added that the uncertain economic outlook meant it was also facing a declining market. "We know that our farmer owners are still facing significant input costs for labour and energy, but we remain committed to continuously looking for ways to deliver the most value to our farmer owners milk,” he said.

Meanwhile, dairy farmers supplying Muller who meet the conditions of the processor's Advantage scheme will see a milk price fall of 3ppl from March. Those in the programme will see their milk price fall to 44ppl from March 1, 2023.

Head of agriculture at Müller Milk and Ingredients, Richard Collins, said the news came amid falling commodity prices. “We are seeing a continued significant reduction in commodity prices driven by reduced demand, coupled with supply ahead of forecast," he said.

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“Following a period of unprecedented milk price increases, we will continue to review all factors which influence farm gate milk price, ensure we support our supplying farmers and protect the security of supply.”

These announcements follow recent analysis by AHDB which said that milk prices were set to change direction this year following record-breaking price increases in 2022. Changes to milk prices for the start of 2023 have been downwards, with just one exception, and are the first reductions in almost two years.

Assuming a typical lag of three-four months, prices are projected to see further cuts into the spring, the levy board forecast.