Arla raises milk price 0.88p/litre as drought cuts UK output by millions of litres

For supply chain managers, the UK’s driest July in memory is more than a weather story—it’s an immediate procurement crisis. Arla has just hiked its raw milk price for the second time in as many months, while Müller and First Milk warn of further increases from September. With domestic grass growth stalled and European crop yields falling, the traditional safety net of imports is frayed, threatening the continuity of dairy and fresh‑produce flows into the retail sector.

The UK is grappling with one of the driest summers on record, triggering a cascade of food supply pain that is already pushing up milk prices at the farmgate and ringing alarm bells over potential vegetable shortages. England received just 8% of its average July rainfall, leaving pastures parched, slashing grass growth, and forcing dairy farmers to produce millions fewer litres of milk. The impact is immediate and quantified: Arla, the UK’s largest dairy cooperative, has raised its conventional milk price by 0.88p per litre in August, on top of a 1.32p increase in July, taking the headline manufacturing price to 38.15p per litre. Barber’s Cheesemakers is also increasing payments to farmers, while Müller and First Milk have put through, or signalled, higher prices from September as supplies tighten.

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Arla has just hiked its raw milk price for the second time in as many months, while Müller and First Milk warn of further increases from September.

This drought is not just a British problem. Heat and dryness have scorched large swathes of mainland Europe, reducing harvests there and eliminating the usual safety valve of imports. For a nation that already relies heavily on fresh produce from the continent, the double blow means that the supply shock cannot be cushioned by turning to overseas markets. The outcome is a return of food inflation fears, just months after grocery price rises had begun to ease. Experts warn that if the dry weather persists, shortages of everyday items such as salad vegetables, tomatoes, cucumbers, and peppers are increasingly likely, echoing the rationing episodes seen in early 2023 when supermarkets including Tesco, Asda, Morrisons, Aldi, and Lidl restricted customer purchases.

The dairy sector is the canary in the coalmine. The National Farmers’ Union (NFU) has stressed that the prolonged hot, dry spell has “severely restricted grass growth and diminished pasture quality.” This creates a double burden: cows produce less milk because of heat stress and poor nutrition, while farmers face spiking feed costs to supplement grazing. The squeeze on raw milk volumes is then passed up the processing chain, forcing dairies to bid up the farmgate price to secure supplies. For processors like Arla and Müller, these higher input costs will eventually feed through to wholesale and retail prices unless supermarkets absorb margins—a scenario that history suggests is unsustainable at current levels.

The ripple effects extend well beyond dairy. Cereal and fruit growers are watching their crops wither, and horticulture producers are warning of reduced yields for field vegetables. The memory of the early-2023 tomato shortage—when crisp supermarket shelves and rationing signs stoked public anxiety—remains fresh. Retailers are now on high alert, and some are already modelling scenarios for salad lines if the August heat continues. The situation also threatens the UK’s fresh produce import dependency: with Spain, Italy, and southern France suffering their own heatwaves and water restrictions, the competition for scarce European supplies will only intensify, potentially pushing up global prices.