Freshways cuts milk price to farmers by 7p a litre, deepening UK dairy squeeze

Most UK dairy producers already paid below production cost before latest cuts

Freshways, a large milk processor that supplies bottles of milk to corner shops, cafes, hotels and wholesalers, announced it will cut the price it pays farmers for liquid milk by 7p a litre from 1 December, reducing it to 29.4p a litre. The National Farmers’ Union called the decision “hugely disappointing”, and its scale surprised producers and sector analysts alike.

The cut lands in a sector where most UK dairy producers were already being paid less for their milk than it costs to produce it, after a year of volatile farmgate milk prices, the summer’s drought and soaring fuel and fertiliser costs triggered by the conflict in Iran. “Milk is leaving the farm at a loss,” said Ian Harvey, a dairy farmer who chairs the National Farmers’ Union’s dairy board, warning that confidence in the sector is “at rock bottom”.

Freshways blamed weaker dairy markets and said poor returns for liquid milk were squeezing processors. Managing director Bali Nijjar said expected improvements in the dairy markets had not materialised and the company’s costs had risen. The reduction almost wipes out the combined 9p a litre in price increases Freshways introduced over the past two months to support farmers after the hot, dry summer.

Harvey said the size of the move, rather than its direction, was the problem. “It’s shaken us to the core,” he said. “We could possibly see an adjustment coming … but to move the price by such a big amount, rather than phasing it over two to three months is hard for the farmers to cope with.”

Harvey helps run a family farm partnership in north Cornwall that milks a herd of 160 black and white Holstein cows and some Ayrshires. His milk is processed locally into cheddar cheese, so the cuts do not affect him directly, but in his union role he speaks to many producers who were already struggling before the latest price cuts were announced.

Arla Foods, one of the three largest UK processors alongside Müller and First Milk, said it was cutting its standard milk price by 0.45p a litre in November, to 40.41p a litre, while keeping its organic milk price unchanged at 58.25p a litre. The dairy cooperative said global milk supplies were stabilising at a high level, although the whey protein market had fallen slightly from record highs. Whey, a byproduct of cheesemaking once favoured by bodybuilders, has surged in popularity among people taking GLP-1 weight loss drugs and consumers trying to boost their protein intake. Arla’s reduction is more in line with the standard, gradual price movements common in the sector.

Dairy market analyst Chris Walkland said the Freshways cut came at a time when other processors, including those that make cheddar and mozzarella cheese, have held their prices. Freshways is “fiercely competitive, especially when milk volumes are high”, Walkland said, adding that to understand the latest price drops “we’ve really got to wind the clock back a year to August 2025”.

Last autumn was positive for milk production in the UK and Europe, contributing to a global oversupply of milk. Milk volumes also did not fall as much as expected during this summer’s drought, because farmers gave animal feed to their cows when the grass stopped growing, helping to maintain production levels. Dairy is a globally traded commodity, and farmgate prices fluctuate with supply and demand.

Switching processors offers many farmers little escape. Farmers who would like to move to a different processor often have little say in who collects their milk, nor the price they are paid. Some of Britain’s largest supermarkets, including Tesco and Sainsbury’s, have committed to paying their farmers based on the cost of production, and other producers are part of co-operatives, but those groups are not open to all. “Farmers cannot move processors easily or at all and they haven’t been able to for several years,” Walkland said. “Only a few processors are recruiting new farmers and then only in ones or twos.”

Walkland said retailers treat their suppliers unevenly. “The retailers look after their liquid milk suppliers very well and they pay them very well, but the milk suppliers who produce cheese and butter for the retailers are not looked after to nearly the same degree,” he said.

Retail shelf prices, meanwhile, have moved up even as farmgate prices fall. Dairy margins have always been tight in an industry where supermarkets have traditionally used low milk prices to tempt shoppers through the doors. Tesco, Sainsbury’s, Morrisons and Asda have increased the price of a four-pint bottle of milk by 10p to £1.75 in recent months, which equates to just under 44p a pint, or 77p a litre.