Arla slashes milk price for producers

The UK’s largest dairy co-op, Arla, has announced a substantial cut to its 2,500 British dairy farmers’ milk price by 1.73p/litre – akin to a drop of 5.6% from next month.

The price fall, the second in as many months, means producers on manufacturing litres (4.2% butterfat, 3.4% protein) will receive 29.27p/litre in February.

For ease of comparison, the price will be 28.16p/litre for a standard litre with a constituent content of 4% butterfat, 3.3% protein.

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The cut means the Arla price will have decreased by 9.3% since the start of the year when it comes into force on 1 February.

The processor market cited factors on the Continent as the driving force behind the cut. 

European markets

“The recent dramatic falls in European commodity markets have continued into the new year, said Arla Foods amba board director Johnnie Russell.

“This has been particularly felt in fat-based products where we have seen falls in commodity market butter prices of circa 40% and cheese prices of circa 30% over the last three months from the historical highs in 2017.”

Mr Russell added: “Protein-based products have not been immune either, though falls are less due to the significantly lower values of these products.

Whole industry affected

“Despite signs of some stability in global markets in recent weeks, the impact of these significant price decreases is still being felt across all of our markets, affecting the whole industry.”

The fall is likely to have a knock-on effect on several other dairy processors that incorporate Arla in milk price formulas or basket mechanisms. 

All eyes will now turn to the UK’s second-largest processor by producer numbers, Muller, to see if it follows suit next week.