A global oversupply of milk amid uncertain international trading conditions is seeing farmgate milk prices suffer, with Arla Foods UK confirming the scale of its price cuts this week.
The milk price paid to Arla Foods UK members will be cut by 1.67 pence per litre (ppl), with effect from Monday. The reduction is a result of a €2 cents per kg cut to the Arla Foods amba on-account price, as well as the quarterly adjustment of the currency exchange rate in its pricing mechanism.
DairyCo, which represents British dairy farmers, said the continued strength of global milk production, combined with the Russian ban on dairy products and a slowdown in demand growth from China, has been adding downward pressure to commodity markets.
Arla’s quarterly reforecast has led to a fall in its forecasted supplementary (13th) payment, with the co-operative currently anticipating this to be 0.65ppl for 2014. The decrease is due a fall in turnover as a result of reduced commodity selling prices, although the final figure will be confirmed in February 2015.
Ash Amirahmadi, Arla UK’s head of milk and member services said: “Globally, milk production has increased by circa four to five per cent, which is out of sync with a lower increase in global demand of circa one to two per cent. This imbalance is resulting in large stocks and, as a consequence, markets have dropped sharply.
“Furthermore, Chinese demand continues to be sluggish and the Russian import ban is continuing to have an impact on European industry prices. This negative pressure is having a significant effect on Arla’s milk price.”
More than 250 farmers in Yorkshire provide milk to Arla.