Arla Foods has shocked the dairy industry by slashing the price it pays for milk this month by 0.9p/litre, despite announcing that it had received more money from retailers only last week.

At the same time, arch competitor Robert Wiseman Dairies said it would be maintaining its current price until the end of February. Dairy Crest has already committed to holding its payments until the end of  March.

Peter Walker, Arla’s director of milk buying,  said: “Recent improvements in returns from our customers mean that oil and utility inflation is now dealt with for Arla Foods – our customers have responded positively to a coherent and sustainable argument for a processor increase. The impact of reducing commodity prices, addressed in this agreed package, is an entirely separate issue.”

Cream and butter values have been falling and Arla’s suppliers, most of whom belong to direct supply group Arla Foods Milk Partnership, the board of which agreed to the cuts, will now receive 0.3p/litre less for their milk, said Mr Walker.

However, fat values had already started to slide last October and producers would see a further 0.6p/litre docked from their milk cheques in February and March to cover this, he added. It is this retrospective move that has angered farmers the most.

NFU dairy board chairman Gwyn Jones said: “The whole thing stinks. All credit to Wiseman, but Arla has once again shown it is happy to lead the way with indiscriminate price cuts to farmers. We will be talking to their retail customers.”

For more see Farmers Weekly on Friday, 3 Feb.