NFU disappointed by Arla's milk price drop

Arlas decision to cut payments to dairy farmers has been criticised.

Arla, whose UK headquarters are in Leeds, recently announced a 0.4 pence reduction in its UK manufacturing standard litre price to 27.73p, despite holding its Arla Foods amba price for both conventional and organic milk for June.

The union’s dairy board chairman Michael Oakes said: “Last month I applauded the UK Arla Farmers board in supporting UK members by removing the impact of the EU milk price reduction of one eurocent per kilogram. Little did I know at the time that they would seek to rebalance the UK purse so soon.

“At the Dairy Industry Newsletter conference last week I heard that EU butter markets are exceptionally good with futures prices up to €5,400 and €5,500 for June and July. At the current exchange rate that’s around £4,720 so I can clearly see why farmers are asking what’s going on.

“Latest figures from AHDB show that while both Actual Milk Price Equivalent and Milk for Cheese Value Equivalent indicators have weakened slightly, the cream income to the processor continues to rise and is now delivering on average 10.1ppl back to the processor.

“A question I want answered is who benefits from this high cream and butter price - as it clearly isn’t dairy farmers? With spells of dry weather impacting grass growth - and ultimately volumes - and the GDT market continuing to strengthen, it makes no sense that are we are now seeing milk price reductions.”

Last month, Dairy Crest declared a 1ppl cut for June and a further 1ppl cut for July, with County Milk Products going so far as to backdate milk price cuts.

Johnnie Russell, board director of Arla Foods amba, said: “Last month Arla Foods amba reduced its price by one eurocent but the UKAF (UK Arla Farmers Cooperative) board made the decision to manage the impact of this cut through the UKAF cash flow, for the month of May, and held the price to prevent a double impact of a milk price reduction, at the same time as maximum seasonality deductions. However, the UKAF board believes that it is necessary to make a small downward adjustment to the milk price, from 1 June... to re-balance the cash flow.”