Arla dairy truck© Tim Scrivener

Arla has raised the milk price for its 2,700 British farmers by 1.6p/litre, as the dairy market recovery begins to pick up pace.

Co-op members will be paid 21.65p/litre in October, after the second monthly increase running. Organic members will be paid 37.2p/litre.

Most of the rise comes from Arla’s improving returns, as commodity values continue to improve. Roughly 0.1p/litre comes from the co-op’s exchange rate mechanism, which gives the UK farmers an extra uplift.

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 Arla Foods amba board director Johnnie Russell said the price was still not adequate, but was good news for farmer-owners.

“Commodity markets, as well as yellow cheese markets in Europe, are continuing to strengthen, and prices across European retail markets also continue to firm,” Mr Russell said.

“Milk production in the EU continues to slow down, and we expect this trend to carry on over the coming months.”

Supply drop

Price rises are finally appearing with more frequency, as the drop in milk supplies feeds through to commodity prices and then the farm gate.

Last week, Dairy Crest announced a 1.5p/litre price rise, phased over two months from 1 October.

UK daily milk deliveries are now averaging 36m litres/day – about 7% down on 2015 levels.

Production across the 28 EU nations in July was 1.3% lower year on year.

British market indicators, which translate commodity prices into pence-per-litre equivalents, were 26p/litre for butter and powder and 28p/litre for cheese in August.

AHDB Dairy’s forward indicator, which looks at European future values, suggests demand will outstrip supply for the rest of the year.