First Milk, the farmer-owned co-operative headquartered in Glasgow, has confirmed that it is to cut the price it pays for a standard litre of milk destined for its liquid pool by 1p per litre (ppl) to 24.1ppl from November 1.

The price that it will pay its members for milk for its manufacturing pool will also be cut by 0.3ppl to 25.8ppl from the same date.

Chairman Sir Jim Paice MP commented: "Since the start of September, there have been three Global Dairy Trade (GDT) auctions.

"Two of these auctions, including the one on Wednesday, have shown downward trends.

"Additionally, our milk production shows no sign of slowing down, and we are up 10 per cent over the last few weeks alone.

"With our main sites operating close to maximum capacity, the vast majority of this additional volume is ultimately going into Westbury, where net returns are below 20ppl."

Nick Holt-Martyn of The Dairy Group said: "The Russian dairy import ban is starting to bite on commodity markets in the UK with powders falling below £2000/tonne for the first time since summer 2012. Powders are just £50/t above the bottom reached in 2012 and perilously close to the intervention level.

"The Russian ban has added a new dimension to the global milk oversupply, which restricts the ability of processors (particularly in Europe) to move raw milk into cheese when powder supplies are plentiful.

"The opposite is happening with excess cheese milk switching into powder for ease of storage when powder markets are already at rock bottom.

"The prognosis is not good until supplies correct in response to low market returns."