Dairy farmers who supply Muller Dairy and Robert Wiseman Dairies are to see their milk prices rise in two stages to 30.5 pence per litre (ppl) by February 1.
The first farm-gate price rise of 0.5ppl to 29.5ppl will kick in from December 1, followed by a further 1ppl increase to 30.5ppl from February 1.
The increased milk price will be offered to all dairy producers supplying the group, except those in Tesco and Sainsbury supply groups, which each have their own milk pricing arrangements.
The move is widely seen as a response to falls in the supply of UK milk. According to Rural Payments Agency provisional figures, October milk production stood at 993.1 million litres, down a huge 69.1m litres (-6.5%) on October 2011.
NFU Scotland's milk policy manager George Jamieson commented: "Muller Wiseman has raised the bar and a milk price of 29.5ppl for December would, historically, be considered a good price – but with costs above 30ppl it must be taken in context. Not only are milk price increases needed now, but they are justified. Milk production on farms continues to plummet, and volume is unlikely to lift before spring. In addition, commodity values are rising, so further price rises are expected by all producers regardless of who they sell their milk to.
"NFUS's market formula indicates that a price based on AMPE and MCVE [price indicators for butter, powder, commodity cheese and whey] shows that the market should be returning at least 30.5ppl at the farm-gate. Cream, often used as a driver to bring prices down, is now more than £1500 per tonne and likely to rise in the run-in to Christmas."
Lawrie and Symington Ltd sold 14 prime heifers in Lanark on Monday to a top of 250p per kg and an average of 229p (+6p on the week), while nine prime, beef-bred bullocks peaked at 236p and levelled at 209.6p (-4.2p). Twelve prime, B&W bullocks averaged 160.7p (n/c).
In the rough ring 35 beef cows averaged 115p and 35 dairy cows levelled at 93p. Sixteen OTM cattle averaged 123p.
There were also 2453 prime lambs that sold to a top of £90.50 per head and 211.7p per kg to average 158.1p (-6.2p).
The 490 cast sheep forward saw ewes sell to £90.50 for Texels and £44.50 for Blackfaces, with the overall average levelling at £38.57 (-£2.65).
The firm went on to sell 235 store bullocks at the same venue yesterday to a top of 212.8p and an average of 190.3p, while 107 store heifers peaked at 220.2p and levelled at 180.7p.
Wallets Marts Ltd sold 1788 prime lambs at their weekly sale in Castle Douglas yesterday to a top of £75 and 182.5p, to average 146.8p.
The 376 cast sheep forward sold to £85 for Texel ewes and averaged £39.09 overall.