The decision was the result of extensive talks between the NFU and Arla about the need for positive price signals in the dairy industry. Arla said it had taken the decision “in recognition of the current difficulties faced by farmers” and in spite of price cuts last year by two of its competitors.
But Arla warned: “Throughout the dairy industry there have been considerable inflationary cost increases which must soon be reflected in prices paid for milk by milk processors’ customers.” NFU president Tim Bennett said that the constant
tit-for-tat price battles had to stop. “There is upward cost pressure on farmers and processors, which means retailers and others must accept that price increases will have to happen,” he added. And NFU dairy board chairman Gwyn Jones said: “We are about to move into a radical new market-based system post-CAP reform. Price signals have to become positive and all those in the supply chain need to understand the market from all angles and work in partnership.”
The NFU said that it planned to approach the Office of Fair Trading to question the operation of the milk market.
A cut in milk-for-cheese prices was announced by Dairy Crest soon after Arla’s price pledge. The 0.5ppl price cut took effect on January 1 and follows eight months of holding prices for manufacturing contracts, said Dairy Crest. Its milk price remains unchanged
Milk purchasing director Arthur Reeves said: “Our rivals have had a significant advantage over us in terms of milk price. If we were to leave prices as they are, other manufacturers would be able to sell cheese made now for up to £150 per tonne less than us next spring.”