UK milk supplies hit by bad weather, rising costs

EDINBURGH, Aug 29 (Reuters) A drop in milk output due to spiralling farm costs and bad weather has forced Britain's largest dairy farmers' cooperative to invoke ''force majeure'' in cutting supplies to customers in September for the second successive month, the cooperative First Milk said today.

''We are continuing to work hard to manage this situation, but raw milk production from our members continues to run at a lower level than forecast,'' First Milk chief executive Peter Humphreys said in a statement.

''Our latest estimates...indicate that production will be more than five percent below that of our original forecast and as a result we are unable to honour our contractual commitments this month.'' ''It is highly likely that we will remain in a situation of ''force majeure'' beyond September,'' he added.

First Milk said it handled approximately two billion litres of milk annually from around 2,800 producers. It said it also supplied about 35 per cent of Britain's cheddar cheese market.

Company spokeswoman Jill Coyle told Reuters bad weather and a near doubling of the cost of animal feed to farmers were key factors for the drop in supplies.

Coyle said First Milk was raising its payment price to farmers to an average of 20.6 pence per litre from September 1, the fourth increase in four months.

Global demand for milk products is steadily rising, meanwhile. Demand in the Far East, including the huge Chinese market, as increasingly affluent consumers has sent the price of powdered milk soaring.

REUTERS SY HS2309