Investment bank Citigroup has cut its target price for Robert Wiseman Dairies to 435 pence, from 540 pence, blaming higher dairy and raw material costs.

In a research note, Citigroup said rising milk and plastic costs meant that it was harder to argue a premium for Wiseman in comparison with the sector and Dairy Crest.

Citigroup said that both Dairy Crest and Arla have recently signalled their intention to increase the price they pay their milk suppliers to 25 pence per litre because of milk shortages after recent poor weather, and rising production costs.

It said it expected Wiseman to follow suit and given that the average price Wiseman paid for its milk in the first half of 2007 was 19.5 pence per litre, an increase to 25 pence would be significant.

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By GlobalData