Dairy firm set to pay farmers more for their milk

Farmers supplying Arla will be paid an extra 2.5 pence per litre for their milk from the start of next month with the Leeds dairy processor announcing what it called “a more transparent milk pricing and sourcing strategy”.

As of October 1, Arla’s standard litre price will be 29.5 pence for Arla Foods Milk Partnership (AFMP) members in the non-aligned, Asda and Tesco seasonal milk pools.

The news comes as farming Minister Jim Paice prepares to unveil a new dairy industry code of conduct designed to strengthen farmers’ hands and make the sector fairer.

Agreed upon by retailers and farming leaders, the new code is hoped by many to be the solution to the ongoing crisis that has engulfed the dairy industry in 2012.

The announcement of the price increase from Arla reverses its plans to cut the amount it pays farmers and represents a victory for the so-called Dairy Coalition, made up of the National Farmers’ Union, Farmers for Action and other farming campaign groups, which has been battling to increase the amount farmers are paid for their milk, which in many cases was well short of the cost of production.

Arla, along with fellow processors Dairy Crest and Robert Wiseman, was targeted with blockades and protests earlier in the summer over its price cuts to farmers and faced a great deal of bad publicity over its treatment of suppliers.

Ash Amirahmadi, Arla’s head of milk procurement, had praise for the work the coalition had done in helping bring the systemic problems in the dairy industry to bear.

He said: “The coalition has been successful in raising public awareness of the plight of farmers in a way that we couldn’t.

“We believe it is our duty to take over the baton and deliver a price and a sustainable sourcing strategy that step changes the returns for our members, restores confidence and takes a major step in moving AFMP towards the co-operative model of Arla Foods, where all farmers benefit equally from the returns from our customers.

“We thank our strategic customers for their significant support and trust in helping us make this happen. We could not have achieved this without their help.”

Jonathan Ovens, AFMP chairman, said: “The increase in cost of production is very real for members but we don’t believe that a cost of production model is the long-term answer because it would lead to a UK dairy market that is uncompetitive and at risk post 2015.

“The milk sourcing model has allowed us to improve returns to members, addresses their concerns and gives choice and confidence in their processing partner.”

The price rise was warmly welcomed by farming leaders.

Peter Kendall, president of the NFU, said: “On behalf of the dairy coalition, we laid down the important challenge to milk buyers to reverse the milk price cuts and find a better way of doing business with farmers. Arla has responded to this challenge in a transparent and meaningful way.

“On the same lines as the coalition and SOS dairy, Arla’s plans are about putting dairy farmers in the driving seat which is why I welcome and support these proposals.

“However, what is important to dairy farmers is that price increases are lasting and industry wide.”

David Handley, leader of Farmers for Action, said: “I’d like to congratulate AFMP for all their hard work and thank Arla for demonstrating leadership in the industry in these tough times.”