Arla has announced it is cutting its farmgate milk price, citing weakening dairy commodity markets.
Its global on-account milk price is being reduced by 1.5 euro cents from Monday (28 April), which will result in UK farmers receiving a new price of 33.74 pence for a standard litre of milk – a reduction of 1.27ppl.
Ash Amirahmadi, UK head of milk and member services, said there had been “a significant negative trend in commodity markets” in recent months. “While the business remains strong, unfortunately we are not immune from fluctuations in the global dairy markets,” he added. “Consequently, we have had to reflect some of the recent downward movements in the on-account price.”
Data from commodity analysts Mintec shows EU prices for skimmed milk powder have fallen by 3.4% over the past month and are down 4.5% year on year, while whole milk powder is down 2.3% month on month and down 4.8% year on year. UK butter prices have also fallen, down 4.8% over the past month, while average Cheddar prices in the UK are down 1.2%, although they remain up on a year-on-year basis.
At the same time, milk production in the UK has soared, with milk output in February being the highest for 20 years.
Rob Harrison, chairman of the National Farmers’ Union’s dairy board, said: “The Arla foods amba milk price for its members is based on returns from its entire global business. This includes a significant exposure to global commodity prices, which have dipped in recent months. It is regrettable they have had to cut the price.
”However farmers will be acutely aware that Arla’s competitors have not increased prices to the same extent or as quickly, as a result of global factors. Farmers will expect those businesses who have chosen to differentiate their pricing strategy to now stick to those principles.”
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