Arla direct suppliers’ price slashed to 16p/litre for March

Arla’s non-aligned direct milk suppliers face a whacking 3.25p/litre milk price cut from 1 March.

This will slash their price to 16p/litre, compared with the 19.25p/litre they received through January and will receive in February.

The 17% cut comes on top of a 0.9p/litre cut on 1 January for the 40-50 direct suppliers estimated to be affected at that time.

Dairy volatility is neatly illustrated by the fact that exactly two years ago the Arla non-aligned direct suppliers were receiving 33.5p/litre – more than double their February 2016 price.

See also: Tesco under fire again over dairy contract claims

The co-op also confirmed late last week that it had lost a significant volume of the fresh liquid milk business it supplies to Tesco, which has decide to move that business to Muller Milk & Ingredients.

Neither Arla nor Tesco would confirm the volume involved although this has been widely speculated at 200m litres.

How the volume loss will be managed is unclear. Arla has Tesco Sustainable Dairy Group (TSDG) members who are full owners in the co-op and those who are direct suppliers with TSDG contracts.

Both are on the TSDG Promar-costed cost-tracker contracts but the benefit of most of this in the case of full owners is shared between all full members.

“We need to assess each individual farmer’s base and TSDG volume and ensure that it reflects the volume required to meet the demand for Tesco,” said a spokesperson.

The farmer-owned dairy business added it had retained significant volumes in a long-term agreement with Tesco. 

Last week the co-op dropped its full member/owner February standard litre price to 21.81p/litre from 1 February.

Rob Harrison, NFU dairy board chairman, said it was vital that Tesco, Muller and Arla made it very clear to all their suppliers how they would be affected by this change.

“We need to ensure fairness and transparency throughout the supply chain for both aligned and non-aligned farmers.  

“What we do know is that Tesco is continuing to show its long-term commitment to liquid milk through the Tesco Sustainable Dairy Group.  

“We also ‎urge Tesco to share its proposals for a sustainable, own-label cheese-sourcing policy. Farmers who have received the cheddar winter supplement will want to know what the future holds for them.”