Arla sparks fear of further cuts

Dairy farmers are bracing themselves for more pain with Arla Foods, the UK’s largest milk buyer, poised to cut its milk price again.

Farmers’ organisations have reacted angrily to the move that will see most members of the Arla Foods Milk Partnership, which supplies 80% of Arla’s milk, receive about 0.7p/litre less from June.

David Handley, leader of Farmers for Action, said protests by the pressure group’s members were now inevitable.

Peter Walker, Arla’s director of milk buying, said the cut was part of the move to market-related pricing announced in January.

“It supports a long-term strategy to encourage farmers to produce milk with a composition that reflects market demand and on a profile that matches Arla’s mainly liquid milk customers.”

Butterfat payments will be reduced to take account of falling cream values.

This would mean a cut of about 0.3p/litre for most members, said AFMP chairman Jonathan Ovens and it follows an earlier cut of 0.9p/litre for the same reason during February and March and an ongoing reduction of 0.3p/litre after that.

Members would also have to cover the seasonal cost of balancing Arla’s milk supply at times of peak production when surplus milk has to be disposed of, added Mr Ovens.

Before October 2005, this was borne by dairy co-ops, but it is now the responsibility of AFMP.

Mr Walker said:

“Those who supply a level profile, accurately forecast and supply milk with the composition that the market demands will benefit.”

Although an Arla spokeswoman denied that the price cuts were related to the firm’s recent slump in profitability, Gwyn Jones, the NFU’s dairy board chairman, was not convinced.

“The cream market no way justifies that sort of cut.

Let’s not pussyfoot around; it’s fairly obvious what is going on.

Whenever Arla is in trouble it comes to the farmers.”

Mr Jones said the cut was also the first tangible evidence of the impact of Asda’s March price cut that wiped 16p off a four-pint bottle of milk.

Mr Handley agreed that Asda had to shoulder much of the blame and would probably be targeted by protestors.

Both said they were worried that other milk processors would follow Arla’s move.

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