A significant increase in milk supplies by other European countries is behind the decision announced by Leeds-based processor Arla Foods today to reduce its farm gate milk price for February, a senior company offical said.
The Arla Foods amba co-operative is cutting the “on-account price” it pays to its farmer members by one eurocent per kilo, with effect from 1 February.
When this reduction is applied to the UK standard litre it equates to a downward movement of 0.75 pence. There is also a small adjustment of 0.05 pence per litre in the forecasted supplementary (13th) payment because of lower overall returns, due to the commodity market impact, Arla said.
These two adjustments, totalling 0.8 pence, take the UK standard litre price to 21.81 ppl.
Ash Amirahmadi, head of UK milk and member services, said the post-EU milk quota landscape was causing downward pressure on the market.
“Global supply and demand continues to be out of balance,” he said. “The emerging dynamic is the significant growth of milk supply in Europe, particularly driven by the Netherlands and Ireland.
“This, combined with the seasonal dip in revenue post-Christmas, is impacting the entire dairy industry and has placed further downward pressure on Arla’s on-account price.
“We are doing everything we can to further reduce our costs, not just in the UK but throughout our global business. Meanwhile, in the UK we are continuing to grow our branded portfolio and only this month we launched BOB, another Arla branded innovative new product, into the dairy category. Despite all of our efforts, we simply cannot buck global industry trends.”
Arla Foods amba farmer board director, Johnnie Russell, added: “As a farmer-owned business, with circa 3,000 British dairy farmer owners, we are extremely aware of the impact that this downturn in the markets is having at farm level. We have seen another drop in the GDT (Global Dairy Trade auction) and are doing everything we can to help our farmer owners navigate through the uncertainty within the markets.”