Dairy farmers are set to benefit from increased farmgate prices for milk in September, driven by a surge in wholesale demand for butter, cream, and cheese.

The rising prices, which have climbed by more than 6p per litre since the beginning of 2024, reflect processors' eagerness to secure milk volumes as autumn approaches.

This demand was further highlighted by a 5.5% increase in wholesale dairy values at the latest Global Dairy Trade auction on August 20, where butter and milk powders saw significant price gains.

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This uptick in demand corresponds with declining milk supplies in the UK, which has further reinforced returns for processors. Since the spring flush, milk supplies have tightened, with UK milk deliveries averaging less than 32 million litres a day towards the end of August, a 0.9% decrease from the same period last year.

In response to these market conditions, several dairy processors have announced price increases. Arla has raised its milk price by 0.89p per litre, bringing it to 43.33ppl for a standard manufacturing litre in September.

Arthur Fearnall, Arla Foods amba board director, noted: “Commodity markets are increasing, driven by fat heavy products, especially butter. The increase is driven by strong demand and additionally fuelled by the low seasonal milk intake and limited availability of fat in the EU. The overall outlook is slightly positive.”

First Milk has also announced a price increase, with its member milk price rising by 0.6ppl to 42.6ppl for its manufacturing standard litre, including the member premium. Mike Smith, vice chairman and farmer director, expressed the company’s satisfaction, stating: “We are delighted to raise our milk price once again, which we are able to do because of the continued healthy performance of our business.”

Müller has followed suit, with dairy farmers supplying Müller who meet the conditions for Müller Advantage set to receive 41.25ppl, a 1.00ppl increase. Richard Collins, head of agriculture at Müller Milk & Ingredients, remarked: “We’re pleased to see stability in the market, and following an increase to our farm gate milk price in September of 1.25ppl, we are in a position to increase it again by a further 1.00ppl for October.”

Organic Herd, a farmer-owned cooperative, has also announced a milk price increase for October, raising it by 2ppl. This brings the co-op's milk price to 56ppl, following a 3ppl rise in August. Martyn Anthony, Organic Herd’s chief executive, emphasised the co-op's commitment to stability and growth, stating: “Our strategy remains one of creating long term stability and growth, by generating returns to farmers that reflect the true value of, and demand for, the high-quality food we produce.”

Organic Herd's latest price increase follows a period of active recruitment into the co-op’s milk pool, with both organic and converting producers joining. Sara Ogborne, director of membership, noted the growing interest from farmers, noting: “From Scotland down to the South West of England we are receiving great interest from existing organic dairy farmers considering joining Organic Herd.”

These increases underscore the positive momentum in the dairy sector, providing much-needed financial relief to farmers as they navigate the challenges of altering supply and demand.