Muller Wiseman will cut the price it pays farmers for their milk by 1.9p to 27.1p/litre from November 1.
The dairy giant, which is the main milk buyer in the north and north-east, is the latest processor to cut the price it pays farmers for their milk.
It blamed a slump in the value of cream and a farmgate milk volume glut for the price cut.
Muller said it was being forced to trade substantial volumes on the spot market as a result of increased levels of milk being produced by farmers.
This, claimed Muller, was exacerbated by a 30% year-on-year drop in the value of cream alongside a 27% drop in the value of butter produced by the firm.
The company’s head of group milk supply Martin Armstrong said: “Very high levels of milk production coupled with weaker demand for dairy commodities are having a sharp impact on farmgate milk prices.
“Our price for September and October has been one of the best available across the UK for farmers who are not part of supermarket-aligned groups and despite this reduction, we believe that this will remain the case in November.”
He said the company and producers board had launched a project to address the imbalance between farmer supply and Muller’s requirements. This is due to be completed by the end of the year.
Last week, dairy giant Arla and troubled retailer Tesco announced plans to cut the price paid to farmers for their milk.
Arla, which buys milk from around one in four UK dairy farmers, announced a 1.67p cut to its standard litre price to 28.55p/litre from Monday this week.
It blamed a fall in turnover driven by increased milk production and lower global demand for dairy products.
Tesco also confirmed that its group of dedicated suppliers, who are paid on a cost of production based contract, will be paid 32.01p/litre for six months from November 1. This is down by 2.19p on the previous six months.