Arla blames inflationary pressures for September price cut
© Tim Scrivener Dairy processor Arla has announced a 0.9p/litre price reduction for both conventional and organic producers, blaming it on the pressures of continued inflation within the supply chain.
From 1 September, the on-account price will reduce by 1 euro cent, which translates into a price for a standard manufacturing litre of conventional milk of 32.30p/litre and 40.66p/litre for organic milk.
This works out as 31.08p/litre for liquid milk based on 4% fat and 3.3% protein.
See also: Read the latest from Farmers Weekly on dairy market trends
Ash Amirahmadi, Arla Foods UK managing director, pointed out the reduction came after recent price increases, but he acknowledged it was still not ideal for farmers who were also experiencing inflationary costs on farm.
“However, right now as a business we are facing increased pressure of inflation across our global supply chain, especially on fuel, energy and packaging, which has been created by the positive global economic recovery following Covid-19.”
However, beyond September the co-operative said the outlook was stable, with commodity prices overall steady.
GDT increase
The latest GDT online dairy commodity auction posted its first increase last week (up by 0.3%), after falls over the past eight consecutive fortnightly sales.
Although the price of whole milk powder fell for the seventh time in a row and has lost 13.7% since mid-May, this was offset by rises for other products including skim milk powder (+1.1%), butter (+4%) and cheddar (2.8%).
Production estimates
AHDB’s estimate for UK production in July 2021 is 1,248m litres, down from 1,262m litres in July 2020.
The fall is thought to be down to a combination of July’s heatwave and easing back of production in response to rising on-farm costs.
Cumulatively, UK production is still higher than at the same point a year ago – 5,306m litres for April-July 2021, compared with 5,254m litres for the same period in 2020.
But commentators have been warning that high bought-in feed costs, variable silage quality and high cull cow prices all point towards the potential for lower milk production later in the year.
AHDB also reports that overall deliveries in the EU-27 are up this year, despite a slow start.
Total production is forecast by the European Commission to grow by 0.8% this year, based on the view that raw milk prices will remain sufficiently high to help offset rising feed costs.