Arla increases milk cost for processors

By James Ridler contact

- Last updated on GMT

Arla's milk prices rose for the first time in three months
Arla's milk prices rose for the first time in three months
Dairy supplier Arla Foods is set to increase the price for its milk by 0.32 pence per litre (ppl) from 1 April, the first rise since December last year, taking the price of milk sent to processors to 27.43ppl.

The firm said the rise was a result of the last quarter’s average exchange rate being introduced into the cooperative’s ‘currency smoothing mechanism’.

Commenting on the price increase, Arla Foods amba board director Johnnie Russell said: “Commodity market prices have stabilised over the last few weeks, however protein prices remain at record low values.

“The recent increases in butter fat and cheese prices have diminished, with these prices also stabilising around their February levels.”

The price rise followed a period of decline, which saw milk prices drop for a number of suppliers in the UK.

Last month, British farmer-owned co-operative First Milk announced that its milk price for March would be reducing by 1.25ppl. 

Prices falling

Arla's price rise followed a fall in the price of its milk sent to processors of 2.16ppl, taking it to 27.11p from 1 March 2018.

Since December, Arla farmers saw a total drop of 5.19ppl. Its farmers are paid on constituents, via a manufacturing schedule, which means they received 26.08p, based on 4% fat and 3.3% protein.

The National Farmers Union (NFU) said it was disappointed and surprised by the drop in price and urged Arla to speed up its commitments to looking at risk management options for its suppliers.

NFU dairy board chairman Michael Oakes said: “It is vital that Arla works with farmers to provide them with the ability to mitigate the effects of volatility on their businesses.

“We are holding Arla UK’s managing director Tomas Pietrangeli to his commitment made at the NFU conference to look into risk management options for Arla suppliers. We are calling on Arla to speed up this work, so farmers can see the results.”​​

Meanwhile, First Milk announced it would be changing its approach to regional milk pool pricing, as it fell for the third consecutive month.

Payments simplified

Payment schedules are to be simplified into two categories, First Milk Liquid and First Milk Manufacturing, with a standard litre priced at 26ppl.

First Milk farmer director and vice chairman Jim Baird said: “While in recent weeks we have seen some recovery in the market, unfortunately, the overall global dairy commodity markets remain weaker than last year, which continues to impact on our returns.

“We know that this price drop will be disappointing news for our members and continue to do all that we can to minimise the impact of reductions.”

Commenting on First Milk’s pricing announcement, the NFU Scotland’s milk policy manager George Jamieson said the new price was disappointing, but not out of line with other processors.

“The drop does not reflect the new pricing model, but the downturn in the dairy market, which NFU Scotland believes should be at the bottom of the curve,”​ said Jamieson.

“As a farmer owned co-op, it must pay as much as it can based on its markets and costs regardless of competitors pricing and over the last two years it is pleasing for hard pressed First Milk farmers to see the gap in prices between the company and its competitors closing.”

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