Mark Allen, chief executive of Dairy Crest, which makes such products as Clover, Utterly Butterly, Cathedral City and Petits Filous, said various factors had combined to force recent milk price rises and said he expected there to be another rise in early 2008.

“The wet summer has meant dairy cattle have been kept indoors and fed on silage rather than grass,” said 48-year-old Mr Allen, who previously led the dairies division at Dairy Crest. “This has used up precious supplies of silage kept back for winter and has meant the milk yield has fallen.”

Mr Allen who took over from the dairy company’s previous chief executive Drummond Hall in January, also blamed the fall in milk production on the spiralling cost of animal feeds made with cereals, the prices of which have in the past week hit 11-year highs because of fears globally that grain harvests will be lower.

Prices are rising again and Mr Allen predicts contracts with farmers could get towards 25p a litre. Industry sources suggest that for every 49p spent at till, 19p goes to the farmer, 18p to the producer and 12p to the retailer.

The question on everyone's mind, from farmer, to retailer, to consumer, is who will absorb those prices. Mr Allen is confident of being able to pass the cost of raising prices for dairy farmers on to the market and analysts seem to support that belief.

Source: Financial Times