Farmers yesterday warned of a gloomy start to the new year as leading milk �purchasers cut their prices.
Farmers yesterday warned of a gloomy start to the new year as leading milk purchasers cut their prices.
Scandinavian-owned Arla, which supplies Tesco, Asda and Morrisons, reduced the price paid to producers by 2p per litre, blaming a decline in the market. First Milk, the UK's largest dairy farmer co-operative, reduced its price by 1.25p per litre.
Conservative rural affairs spokesman John Scott, who is also a farmer, said the cuts were "devastating".
"Even at previous price levels, many dairy farmers were finding it impossible to make a worthwhile living and this news could render many businesses unviable," he said.
"When margins are as tight as they are, the difference between profit and loss can be as little as a fraction of a penny, given the volumes involved.
"These cuts, at a time when overdrafts are high and credit is so difficult to access, could well be a fatal blow for many dairy farmers, and there is now a real danger of Scotland losing its critical mass in terms of producers.
"The strategic significance of losing our dairy industry cannot be over-stated."
The National Farmers' Union in Scotland said it will challenge the firms to justify their cuts.
Willie Lamont, chair of the union's milk committee, said: "Milk purchasers have spent several months warning farmers of likely milk price cuts but now that these are a reality for many Scottish producers the air of gloom and despondency will have deepened.
"With the milk price now falling, for many the costs associated with producing milk will significantly outweigh the price that some dairy farmers receive for their efforts, forcing them to once again consider their future in milk production.
"The reality is that some Scottish dairy farmers will be in a position to sit tight and ride out this difficult period and some will feel that enough is enough."
Arla said the new deal, which came into effect today, brought the standard price per litre to 25p. The firm had increased the rate by more than 8p in the past two years but said a buoyant market is now in decline.
Jonathan Ovens, chair of Arla Foods Milk Partnership, said: "While it is extremely disappointing that we are starting the new year with a price drop, Arla has presented a sound business case for a reduction, based on falling commodity returns, which the board has recognised."
