Supermarket negotiations ward off a milk price war

Prospects of a renewed milk price war in January seem to have been averted by signs that the major retailers may be prepared to pay more for their milk.

It had been expected that Robert Wiseman Dairies would cut its contracts in January – with Arla likely to follow – after a warning in its interim results released last November.

But Wiseman suppliers have been told there will be no cut in January.

Pete Nicholson, milk procurement director, said: “Negotiations with our major customers are ongoing and have yet to be concluded.

If successful these negotiations would relieve at least some pressure on raw milk prices over the coming months. To provide some stability while these negotiations are finalised we have decided to extend our current price for January.”

Mr Nicholson said the company would start to address the issue of its competitors once it had finished negotiations with retailers, perhaps as soon as the end of the month.

According to some within the industry, Wiseman’s move will have come as a shock to Arla Foods because it was hoping to use a fall in prices as an excuse to cut its own payments.

This, however, was denied by Jonathan Ovens, chairman of Arla Foods Milk Partnership, which supplies most of Arla’s milk.

Wiseman’s decision wasn’t a surprise to us because the terms of their contracts means they would have had to tell their members by the end of November if they were going to cut prices for January.”

Mr Ovens said Arla would also not be cutting its price in January, but he warned that falling cream values were hitting profitability on the 1m litres of excess fat produced by the company each week.

Any February move downwards by Wiseman would also increase the likelihood of an Arla reduction, he added. “I’m not saying it would happen automatically but it would certainly result in a conversation between us and Arla.”

Tom Hind, senior NFU dairy adviser, said he was pleased prices would remain stable in January but would be “appalled” if prices fell in February.