DAIRY farmers face another round of farm gate price cuts.

Both Dairy Crest and Muller this week announced new cuts from November 1.

Muller will pay its producers 27.1 pence per litre - 1.9ppl down on the 29ppl being paid in October.

Dairy Crest announced a 1.3ppl cut to 27.04ppl for farmers on standard liquid contracts and to 29.04ppl for those on Davidstow contracts.

Muller said that, compared to last year, UK dairy farmers had boosted production by the equivalent of more than 750 milk tankers a week.

Its latest cut was due to significantly lower returns from its sales of cream, butter and surplus milk not required to meet customer obligations. This has given it no choice but to trade substantial volumes on spot markets which, far from adding value, are commanding returns which are significantly lower than the company’s own farmer price.

The record milk volumes coupled with weak demand for dairy products had also contributed to a 30 per cent year on year drop in the value of its cream and 27 per cent drop in the value of its butter.

Martin Armstrong, head of group milk supply for Müller UK & Ireland Group, said: "Very high levels of milk production coupled with weaker demand for dairy commodities are having a sharp impact on farm gate 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.

“We share the concern of dairy farmers, who are anxious to see some signs of improvement in what is a very volatile market.”

The company and the Müller Wiseman Milk Group farmer board are working to identify mutually beneficial ways of achieving closer alignment between farm milk production and Müller’s demand profile, to reduce the need to sell surplus milk into commodity spot markets.

Mike Sheldon, Dairy Crest group procurement director said it was a challenging time for all who work in the dairy sector.

“We are very disappointed to have to make this further price announcement to our farmers. The situation in global commodity markets, which directly impacts our domestic returns especially whilst milk production remains strong, has not improved. We have therefore had to reflect this in our November milk prices.

“We hope that the dairy markets will return to a steady footing soon, but in the meantime we will continue to work in partnership with DCD to deliver a robust support package for all of our supplying farmers.

“We are pleased that over 200 of our farmers have now taken up the opportunity to put some or all of their milk volume on one of our Formula Contract options. Following the latest offer process, for Formula Contracts from October 2014, all the milk available was signed up and we are in the process of confirming the outcome to the farmers who applied.”