Dairy crisis

Dairy sector needs ‘urgent help’ after ‘devastating blow’

By Laurence Gibbons contact

- Last updated on GMT

Arla has been forced to slash its milk price
Arla has been forced to slash its milk price

Related tags: Dairy

The dairy industry has been hit with “another devastating blow” as Arla Foods has cut its milk price, calling for urgent help from industry and government, according to the National Farmers Union (NFU).

Arla slashed the price it pays its UK members by 1.18 pence per litre (ppl) taking it to 23.81ppl, effective from July 6.  

Arla’s cut follows similar moves from First Milk, Dairy Crest and Müller UK & Ireland recently.

Dairy businesses now needed urgent help from the UK government, the NFU claimed.

“This is yet another body blow to dairy farmers whose businesses have been in utter turmoil for the past 12 months, with 450 quitting dairy farming since this time last year in England and Wales,”​ said NFU dairy board chairman Rob Harrison.

‘Urgent help’

“The recent series of cuts have highlighted the need for short-term solutions to address the problems happening now – farmers need urgent help from industry and government.”

UK government must insist on best practice in the supply chain; grow dairy consumption and support more investment in dairy processing in the UK, he added.

“We need government to move away from paying lip service and focus on the here and now,”​ Harrison claimed. “Their long-term solutions must take a back seat while we focus on the immediate crisis …”

All milk processors should improve transparency in pricing and stop idly following one another to the bottom, Harrison claimed.

Arla price cut

  • Arla’s amba on-account price will reduce by one eurocent per kg
  • This is 0.77 pence when applied to the UK standard litre
  • The introduction of this quarter’s exchange rate into the mechanism has a 0.41 pence negative impact on the milk price.
  • The combined impact of the currency smoothing mechanism and the reduction to the on-account price lowers the UK standard litre by 1.18 pence, taking it to 23.81 pence.
  • The Arla direct milk price will reduce by 1ppl from August 1 2015

“This is a dire situation and we need to see the dairy industry pull through this period of volatility.

“Government has a role here in insisting processors provide up-to-date market and production data so that the whole supply chain can better understand what’s happening and how to manage risk in the future.”

Downward trend

Arla’s head of UK milk and member services Ash Amirahmadi said commodity markets were continuing their downward trend, despite only a minor reduction in prices in the latest global dairy trade auction.

“While we have taken significant mitigating actions, the impact has been felt on our traded business and more recently on European markets which are also in decline​,​ he said.

“Unfortunately, these factors are affecting the entire dairy industry and despite our efforts it has not possible to buck the trend. I can confirm that our customers in the UK are supporting us at this very difficult time for our members.”

Related topics: Supply Chain, Dairy

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