Dairymen squeezed by milk battle

DAIRY FARMERS are already feeling the pain as the UK‘s big-three milk processors battle to secure their share of supermarket business in a tussle sparked by Asda‘s sole-supplier deal with Arla in May.

In a reversal of fortunes, Arla has cut its September milk price by 0.4p/litre after last week‘s (Aug 28) announcement that it had lost its 140m-litre contract with supermarket Sainsbury‘s, leading to worries that farmers will become caught up in a price war.

But a spokeswoman for the firm said the reduction was to bring Arla in line with Dairy Crest and Robert Wiseman Dairies, which both made cuts earlier in the summer.

Jonathan Ovens, chairman of Arla Foods Milk Partnership, which supplies about 60% of Arla‘s milk, said in a letter to members: “It is our belief that this [the lost contract] was not as a result of poor quality product or poor service, but as a result of lower prices being offered.”

Both Sainsburys and Robert Wiseman Dairies, which was the main beneficiary of Arla‘s loss, denied price was an issue.

But Arthur Reeves, head of direct supplies at Dairy Crest, said: “People who pretend this business has not changed hands on the back of cost are kidding themselves.

“Supermarkets don‘t change business for no profit to themselves.”

Dairy Crest also suffered a massive loss of business last week (Aug 27) as Tesco announced a rationalisation of its milk supply to two suppliers, just days after Sainsbury‘s decision to replace Arla with Wiseman.

Farming organisations said any cuts in the autumn would not be tolerated.

David Handley of Farmers for Action said: “There is no justification for cutting 0.4p/litre, if anything there is justification for an increase.”

Direct action against firms that cut prices or supermarkets that increased their retail margin was under consideration, he added.