Sluggish cheese sales in the retail sector are driving producers to divert volumes to other sectors.
A tough trading environment for the hospitality sector is further reducing demand.
December prices have reduced by an average of 7.5p per kilo for mild cheddar, with a further decrease of more than 10p per kilo expected for January.
The high stock levels will take months to normalise, increasing expectation that the sector will continue to soften into the Spring.