Arla conventional milk producers will get a 0.9p/litre price increase from 1 November 2021, while the organic milk price will not be moving.
This puts the co-op’s standard manufacturing price for conventional milk at 33.52p/litre, for milk of 4.2% butterfat and 3.4% protein. This price is based on collection every other day of milk in the top quality band, with a minimum supply of 1m litres a year.
The organic milk price will remain at 40.98p/ litre for Arla farmer owners.
Wholesale dairy markets have been strengthening through the last few weeks, and this week’s New Zealand GDT online auction index rose by 2.2%. All products rose in price, with butter and Cheddar posting two of the strongest gains.
Nate Donnay, director of dairy market insight at analyst StoneX, pointed out that US milk production in September was much weaker than expected, rising by just 0.2% compared with September last year, with dairy cow numbers there having fallen 85,000 head in four months.
The market has also been given further impetus with the news that Chinese dairy imports in September were close to what had been expected, rising 3% compared with the same month last year, with whole milk powder demand strong but skim milk powder imports falling.
“Given how far the herd has dropped, we should still be looking at minimal year-on-year production growth in the first half of 2022,” said Mr Donnay.
“Combine that with weak EU milk production and the good demand we’re seeing, and it should be supportive for prices.”
Commenting on the Arla price announcements, Arla Foods amba board director and farmer-owner Arthur Fearnall said: “Pricing for all EU dairy commodities, especially cheese, has continued to increase significantly in September based on low availability.”
However, the UK organic market had not yet returned to pre-Covid levels, especially in food service, he said.
Graham Wilkinson, group senior agriculture director at Arla Foods, said that cost inflation was hitting all the co-op’s farmers now in a way not seen in many years.
“While we are pleased to be able to announce an increase in our conventional farmgate price for next month, we can see that this will simply not be enough to cover the increase in longer-term costs that so many farms are now facing,” he said.
“It could pose a risk to our food supply and production in the UK unless the added costs are recovered in the market, and naturally this has our full focus in the weeks and months ahead.”