UK dairy sector faces renewed margin pressure as Freshways cuts milk price

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Freshways will cut its farmgate milk price by 7 pence a litre from 1 December, bringing it down to 29.4 pence a litre due to weak dairy markets.
Arla Foods lowered its standard milk price by 0.45 pence to 40.41 pence a litre in November, while keeping its organic milk price steady at 58.25 pence a litre.
UK dairy farmers face higher fuel and fertiliser costs and volatile milk prices, driving confidence in the sector to 'rock bottom' according to industry sources.

Processor price cuts deepen farmgate squeeze

As reported by The Guardian, Freshways said it will cut the price it pays farmers by 7 pence a litre from 1 December, taking the rate to 29.4 pence a litre. The processor, which supplies bottled milk to corner shops, cafes, hotels and wholesalers, said weaker dairy markets and poor returns on liquid milk are putting pressure on processors.

The reduction largely reverses the combined 9 pence a litre in increases that Freshways introduced over the previous two months to support farmers after the hot, dry summer. Managing director Bali Nijjar said expected improvement in dairy markets has not materialised and that the company’s costs have risen.

Arla Foods, one of the UK’s three largest processors, has also announced a cut to its standard milk price, lowering it by 0.45 pence a litre in November to 40.41 pence a litre. It left its organic milk price unchanged at 58.25 pence a litre, in a move that is more in line with the sector’s usual gradual price adjustments.

Confidence weakens across the dairy industry

Farmers are grappling with a difficult period marked by volatile farmgate milk prices, summer drought and sharply higher costs for fuel and fertiliser linked to the conflict in Iran. Ian Harvey, a dairy farmer, said milk is leaving the farm at a loss and warned that confidence in the sector is at rock bottom.

Dairy prices are shaped by global supply and demand, and producers are accustomed to swings in the market. But Harvey said the scale of the Freshways reduction has shaken him to the core.

Chris Walkland, a dairy market analyst, said the Freshways move comes while other processors, including cheddar and mozzarella producers, are holding prices. He said Freshways remains highly competitive, particularly when milk volumes are high, and that the latest cuts underline the complexity of current dairy market economics.

Strait of Hormuz shipping disruption and its impact on food supply chains was previously covered by our publication, highlighting how higher fuel and fertilizer costs are starting to weigh on harvests, planting decisions, and farm yields. We also noted that with commodity prices already rising and disruption risks lingering, the cost pressure can filter through the supply chain and intensify the squeeze on producers’ margins.

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