UK dairy processors urged not to play copycat with milk price cuts

05.03.2018

Dairy industry figures urged processors not to use Arla Foods’ latest drop in milk prices to farmers as an excuse to slash their offers, but pay as much as they can to producers.

The extent of the Arla cut - down 2.16p per litre, taking the manufacturing litre to 27.11p per litre - shocked industry analysts.

First Milk dropped its prices 1.25p per litre across all its pools, while on Wednesday, Muller announced a 1.5p per litre drop for the price paid to its Muller Direct farmers from April 1, to 26.5p per litre.

‘Be more transparent’

George Jamieson, milk policy committee chairman at producers’ group NFU Scotland, highlighted the co-operatives’ pricing had to be based on incomings and outgoings and did not mean others had to follow suit.

“Companies will build more trust if they are a bit more transparent and do not just base it [price] on what their competitors are doing,” Mr Jamieson said.

At the NFU (or National Farmers Union), dairy board chairman Michael Oakes asked whether Arla’s branded strategy, aimed at reducing volatility, was really working.

With Arla’s offer falling faster than anyone else, dropping 5.19p per litre over the past three months, he questioned whether the strategy it was actually insulating the price from broader market moves.

Announcing Muller’s cut, milk supply director Rob Hutchison said investment into branded and private label had mitigated the decline.

Big contributor

Johnnie Russell, director at Danish-based Arla Foods, came under fire from some members who claimed he had not been available for contact and therefore “unaccountable” to members.

An Arla spokesman said democracy was at the core of the co-operative structure and members were encouraged to speak with their elected representatives “whether at district level, or UK Arla Farmers board level”.

The co-operative added that branded revenue had contributed significantly to its financial performance last year and was the key area of future growth for the global dairy market.

“Global movement provides an overall direction on price.

“However, as a European business, a number of variables, such as currency, also have a role to play in the determination of Arla’s milk price.”


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