ARLA'S milk prices will decrease by 2.65p per litre from February as the co-operative warned of an uncertain economic outlook.

The co-op's milk prices for next month will decrease for both conventional and organic milk, to 48.47ppl and 53.25ppl respectively.

The dairy cooperative, which is supplied by 3000 UK farmers, warned that consistently high inflation continued to drive a reduction in consumer demand.

Arla added that shoppers were set to lower their overall grocery spend.

"As consumer demand falls, milk volumes in the commodity market continue to increase, thus pushing commodity prices down further," said Arla Foods director, Arthur Fearnall.

"The organic market is also reacting in a similar way, as consumer consumption continues to react to the high inflation coupled with less demand.

"The outlook is negative, driven by a decline in commodity prices and reduced consumption.”

Paul Savage, agriculture director for Arla UK, added that the uncertain economic outlook meant Arla was currently facing a declining commodity market.

"We know that our farmer owners are still facing significant input costs for labour and energy," he explained.

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"We remain committed to continuously looking for ways to deliver the most value to our farmer owners milk.”

Dairy farmers supplying Muller who meet the conditions of the processor's Advantage scheme will also see a milk price decrease from February.

Those producers who follow the programme will see their milk price fall to 47 pence per litre.

It follows recent analysis by AHDB which said that milk prices are set to change direction this year following record-breaking price increases in 2022.

Changes to milk prices for the start of 2023 have been downwards, with just one exception, and are the first reductions in almost two years.

Assuming the typical lag of three-four months, prices are projected to see further cuts into the spring, the levy board said.