Arla avoids cutting May milk price for UK members

Arla’s UK members will see prices for conventional milk unchanged for May.

This comes as a result of a decision by the co-op’s UK board to prop up the price here despite a one eurocent a kilogramme drop for the co-op’s continental producers.

The UK Arla Farmers Co-operative (Ukaf) board has used a reserve fund to maintain the conventional manufacturing price at 28.13p/litre, in anticipation of a cash benefit from the exchange rate mechanism it uses to smooth sterling-euro currency fluctuations.

See also: Arla’s 0.42p/litre April milk price cut slammed

The manufacturing price is based on every other day collection of top-quality band milk, from producers supplying at least one million litres at 4.2% butterfat and 3.4% protein.

The liquid price of 27.03p/litre, based on 4% fat and 3.3% protein, will also be unchanged for May.

“The one eurocent Arla Foods amba reduction has been fully reflected in Ukaf’s cashflow,” said Jonathan Ovens, Arla Foods amba board director.

“However, to avoid the unintended consequence of a double on-farm impact of a milk price reduction at the same time as maximum seasonality deductions, the board has adopted a pragmatic and prudent approach to use expected future benefits from the currency exchange mechanism to balance the milk price throughout May.

“Over the calendar year of 2017, and in accordance with Arla’s farmer-owned principles, the cashflow will be balanced and money in will equal money paid out.

“The Ukaf board will continue to carefully monitor the cashflow and ensure that the integrity of the Arla Foods amba payment model is protected.”

The decision to leave UK prices unchanged follows a much-criticised 0.42p/litre reduction, which took effect from 1 April.

Disappointing

NFU dairy board chairman Michael Oakes said the May price hold was disappointing. “The Arla milk price is now well out of line with Friesland-Campina, which is a very similar business in Europe,” he said.

“We welcome Ukaf bringing forward the currency smoothing mechanism and understanding how fragile Arla producer confidence is at the moment. We’ll be communicating with Arla to find out the reasons behind its decision.”

From 1 January next year Arla farmers will be paid on constituents and the co-op will move to a manufacturing schedule only.