DAIRY FARMERS of Britain has pulled out of a 400m-litre contract with dairy processor Arla after being told it would be paid less for its milk.

The milk co-op‘s unprecedented move follows Arla‘s decision to cut the price it pays suppliers from September onwards.

It is understood co-ops were expected to take the same cut as the firm‘s direct suppliers of 0.4p/litre.

Dairy farmers are also pushing the firm to reverse its decision, which was branded by many at the time as completely unnecessary because there was no downward pressure on the market.

Arla said it had taken the step to bring its ex-farm prices back into line after an earlier cut by competitors Robert Wiseman Dairies and Dairy Crest.

Malcolm Smith, DFB‘s chief executive, decided to make a stand and refused to accept Arla‘s price cut – even though the contract accounts for 20% of the co-op‘s 2bn litres of milk.

A spokesman said: “We can confirm we have given notice on contract, but we hope we can work our way through this.”

The contract will expire at the end of September, 2005. It is understood that talks to reinstate it could take place at any time between now and that date if the price improves.

Peter Walker, director of milk buying at Arla, seemed to cast doubt on DFB‘s move. “I am disappointed DFB are choosing to make inaccurate comments to the media,” he said.

“Arla has always conducted its business relationships in a professional and private manner and will continue to do so.”

Contrary to recent regional newspaper reports, south west-based co-op Milk Link, which supplies a similar volume of milk to Arla, says it has not accepted a price cut.

Negotiations were said to be continuing.