UK dairy farmers, already reeling from a year of below-cost milk prices, drought and soaring input costs, faced a new blow this week as two large milk processors announced fresh cuts to the price they pay for liquid milk. Freshways, a big processor supplying corner shops and wholesalers, said it would slash its price by 7p a litre to 29.4p from 1 December, almost wiping out the combined 9p increases it gave over the past two months after the summer drought. Arla Foods, one of the three biggest UK processors, also announced a 0.45p a litre reduction in its standard milk price to 40.41p a litre.
The scale of the Freshways cut surprised producers and analysts, with the National Farmers' Union calling it “hugely disappointing”. Ian Harvey, a dairy farmer who chairs the NFU's dairy board, said the move had “shaken us to the core”. He said confidence in the sector was “at rock bottom”.
Most UK dairy producers had already been paid less than the cost of production after a year of volatile farmgate prices, the summer drought, and rising fuel and fertiliser costs linked to the conflict in Iran. Freshways blamed weaker dairy markets and said poor returns for liquid milk were squeezing processors. Arla said global milk supplies were stabilising at a high level, though the whey protein market had fallen slightly from recent highs after the byproduct from cheesemaking surged in popularity with people taking GLP-1 weight loss drugs.
Chris Walkland, a dairy market analyst, said the Freshways cut came at a time when other processors, including those making cheddar and mozzarella cheese, had held their prices. He described Freshways as “fiercely competitive” and said the situation stemmed from a global oversupply after strong production in the UK and Europe last autumn, compounded by the summer drought that did not reduce milk volumes as much as expected because farmers fed animal feed to maintain production.
Farmers who would like to move to a different processor often have little say in which processor collects their milk or the price they are paid. While some larger supermarkets such as Tesco and Sainsbury's have committed to paying their farmers based on the cost of production, and some producers are part of co-operatives, these arrangements are not open to all. Walkland noted that only a few processors are recruiting new farmers, and then only in small numbers.
Analysis
Why This Matters
- Dairy farmers already operating at a loss face deeper financial strain, threatening the viability of many family farms.
- The cuts could further reduce confidence in the sector and lead to more farmers leaving the industry.
- The episode highlights the imbalance of power between farmers and large processors, and the vulnerability of UK food supply chains.
Background
UK dairy farming has long been characterised by tight margins and volatile milk prices, with farmers reliant on a small number of large processors. The industry has faced pressures from global commodity markets, supermarket price wars, and rising costs of feed and fertiliser. The summer of 2026 brought a severe drought that hit grass growth, adding to the costs of production. The conflict in Iran also contributed to soaring fuel and fertiliser prices, as noted in the report.
Key Perspectives
Ian Harvey (NFU dairy board chair and farmer): says the price cuts have “shaken us to the core” and confidence in the sector is “at rock bottom”. He argues that while some adjustment was expected, the size of the Freshways cut is too large to be phased in.
Freshways (managing director Bali Nijjar): blames weaker dairy markets and says poor returns for liquid milk are squeezing processors. Expected improvements did not materialise, and its costs rose.
Arla Foods: says global milk supplies are stabilising at a high level, though the whey protein market has fallen slightly from record highs, which the company links to the popularity of GLP-1 weight loss drugs boosting demand for the byproduct.
Chris Walkland (dairy market analyst): says the Freshways cut comes when other processors have held their prices. He attributes the situation to a global oversupply following strong production in the UK and Europe last autumn and a drought that did not reduce milk volumes as much as expected. He notes that farmers have limited ability to switch processors.
What to Watch
- The impact of the Freshways cut on other processors' pricing decisions; whether more cuts follow.
- The response from major supermarkets and whether they adjust their own milk pricing commitments.
- The effect on next year's spring calving season and whether farmers reduce herd sizes or exit the industry.
Checked
12 claims in this story checked against 1 source: 10 supported.
Show each claim
- Not in the sourcesThe headline puts “shock” in quotation marks as a description of the price cut.World news | The Guardian: “the industry has been shaken further by the decision by two large milk processors in recent days to cut the price they pay farmers for their liquid milk.”
- SupportedTwo large processors announced cuts to the price they pay farmers for liquid milk.World news | The Guardian: “the decision by two large milk processors in recent days to cut the price they pay farmers for their liquid milk.”
- SupportedFreshways cut its milk price by 7p a litre from 1 December, taking it to 29.4p.World news | The Guardian: “announced it was slashing the price it pays for milk by 7p a litre from 1 December, reducing it to 29.4p a litre.”
- SupportedArla cut its standard milk price by 0.45p a litre to 40.41p a litre.World news | The Guardian: “announced it was slicing 0.45p a litre off its standard milk price in November, to 40.41p a litre.”
- Partly supportedUK dairy farmers had faced a year of below-cost milk prices.World news | The Guardian: “Most of the UK’s dairy producers were already being paid less for their milk than it costs to produce it after a year of volatile farmgate milk prices”
- SupportedThe Freshways cut almost wiped out the combined 9p-a-litre increases it had introduced over the previous two months.World news | The Guardian: “The cut almost wipes out the combined 9p a litre price increases Freshways introduced over the past two months”
- SupportedThe NFU called the Freshways cut “hugely disappointing”.World news | The Guardian: “the NFU called it “hugely disappointing”.”
- SupportedIan Harvey said the move had “shaken us to the core”.World news | The Guardian: ““It’s shaken us to the core,” said Harvey.”
- SupportedHarvey said confidence in the sector was “at rock bottom”.World news | The Guardian: “as he warns confidence in the sector is “at rock bottom”.”
- SupportedArla said global milk supplies were stabilising at a high level.World news | The Guardian: “The dairy cooperative said global milk supplies were stabilising at a high level”
- SupportedWalkland said the Freshways cut came while other processors, including cheddar and mozzarella makers, held their prices.World news | The Guardian: “Chris Walkland, a dairy market analyst, said the Freshways cut came at a time when other processors, including those who make cheddar and mozzarella cheese, have held their prices.”
- SupportedFarmers may have little say in which processor collects their milk or the price they receive.World news | The Guardian: “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.”