The plans – described as “a roadmap to co-ownership” – together with changes to the Arla Milk Link merger conditions could boost the number of British dairy farmer owners to 3,200.
The moves will strengthen Arla’s co-operative status in the UK, according to the Arla Foods board of directors and the board of Milk Partnership Limited (MPL) – Arla Foods Milk Partnership’s (AFMP) investment company.
If the plans go ahead, MPL will become a co-owner of Arla Foods from the beginning of next year.
Existing suppliers of AFMP, Arla direct, and Arla Milk Link direct will be invited to accept the ownership offer.
AFMP farmers who do not want to take up the offer will be able to transfer to an Arla direct contract.
Dairy producers who choose to sign up will benefit from the same membership rights as the existing 12,250 farmer owners, including Arla Milk Link farmers.
From January 1 2014, Arla Milk Link members will receive Arla Foods’s supplementary payment, two years ahead of schedule. The first payment will be paid in early 2015 for milk supplied next year.
The supplementary payment is an additional annual payment of the global company’s profit. This is paid on a pence per litre basis, usually in March after the year end.
Jonathan Ovens, chairman of MPL and AFMP, said the deal showed the business was delivering one of the founding principles of AFMP, which was to secure a home for every litre of members’ milk.
“I’m delighted that we have agreed the terms of the roadmap, which offer circa 1,600 farmers the benefit of joining a major European co-operative that consistently pays one of the highest milk prices and a share of the profits,” said Ovens.
The deal offered the security of a milk price determined by European and world markets, from a well-balanced, well-invested, farmer-owned business, which has access to the global marketplace and operates across all dairy categories, he added.
Johnnie Russell, director of Arla Milk Link and Arla Foods, said the proposals were a key milestone for the business in the UK.
“This will be welcome news for Arla Milk Link farmers and further emphasises the benefits of Arla membership,” he said.
Russell added: the original agreement with Milk Link, which allowed for a three-and-a-half-year transition period to full membership, was negotiated on the basis of a historic performance price gap which does not currently exist, given the strong business performance in the UK since the merger last year.
The proposals will be considered by Arla Foods board of representatives next month.