After several increases and price holds in December – including by Arla, Muller, First Milk and Saputo – some processors now announced price drops.

Arla has reduced its price by 0.86ppl, putting conventional and organic milk at 51.12ppl and 55.90ppl respectively. Arthur Fearnall, Arla Foods amba board director, said: “Over the last month we have experienced a continued decline in global dairy commodity prices across categories such as yellow cheese and butter. European and US milk intake has now begun to increase from the previous stable levels. The outlook is negative, driven by a decline in commodity prices and reduced consumption.”

Muller Milk & Ingredients also announced a price reduction from February, a move prompted by falling commodity prices. Farmers supplying the processor through its Advantage scheme will receive 0.47ppl for their milk from next month.

Freshways, who had a price hold in place for December 2022, also decreased its prices for January by 3.0ppl.

Headwinds ahead?

Wholesale milk prices in the UK and Europe declined again during December, with cream, butter, skimmed milk powder and cheddar all down at the end of 2022. Continued decline in global commodity prices could put downward pressure on farmgate prices and prompt more milk buyers to issue price reductions.

During 2023, Rabobank and AHDB expect a slight increase in milk availability, with production from key exporting regions expected to rise by around 1%. According to Maxum Foods, EU domestic cheese and butter demand ‘will worsen’ in the first half of 2023, while in the US, cheese demand is set to remain resilient, if with stronger emphasis on mozzarella and demand on lower-priced ranges. China, which is currently trying to curb a COVID-19 outbreak after restrictions were relaxed recently, could bring further uncertainty to prices and milk use in Oceania.

Consumer demand could spell yet more uncertainty, as the effects of food inflation on spending become clearer in the months to come.