One of the main milk buyers in the UK has warned dairy prices may not improve until 2016.
Arla, which buys milk from around one in four UK dairy farmers, made the warning when it released its interim results for the year.
The European farmers’ co-operative said turnover for the first half of the year was down 3.8% to £3.73billion, while the performance price was 24.57p per kilo of milk, compared with 30.32p the year before.
The firm said that since the start of 2014 the global market commodity price for whole milk powder had dropped 53.1% to price last seen in 2009.
Co-op chairman Åke Hantof said: “2015 has proven to be a very challenging year indeed for dairy farmers – both in Arla and elsewhere. The current earnings do not cover the costs of milk production, which is a heavy challenge for us farmers and our individual businesses. In the past year Arla has been working very actively to buffer the market situation without damaging our market positions. This proves that we have the right strategy, however no strategy can remove the current world market slump.”
Chief executive officer Peder Tuborgh said the co-op had cut its investment budget by 30% and it was looking to streamline the business to cut costs.
He said full year turnover was expected to reach around £7.49billion.
“The global dairy market has rarely been as unpredictable as now, and unfortunately 2015 is proving to be as challenging as we anticipated. Our long-term view is that the market will turn again in the first half of next year, which is why we will stay focused on our strategic agenda,” added Mr Tuborgh.
Arla recently confirmed it was holdings its milk price at 23.01p a litre for September
However, other milk buyers have been forced to cut their prices again.
Earlier this month the main milk buyer in the north and north-east – Muller Wiseman – confirmed its price will fall next week.
From September 7, farmers will receive 22.35p a litre – down 0.8p a litre.
The company blamed a “significant imbalance between supply and demand” for the price cut and said British dairy farmers were producing the equivalent of 40 extra pints of milk for every head of population in the UK.
While, farmers supplying troubled farmers’ co-operative First Milk will have their milk prices cut from September 1.
Last week the Glasgow-headquartered co-op confirmed its balancing milk pool prices will reduce by 0.2p, while the manufacturing pool prices will fall by 0.3p.
The business has been at the centre of the milk crisis since the beginning of the year when it was forced to delay payments to farmers due to cash flow problems.