Arla plant

An upturn in global dairy commodity prices and recent retailer initiatives to pay more to dairy farmers have contributed to Arla’s first milk price increase in more than six months.

The dairy co-op today said it would increase the price paid to on-account dairy farmers by 0.5 eurocents from Monday (28 September).

When applied to a UK standard litre, the increase amounts to a 0.38 pence per litre uplift.

However, the effect of fluctuations in exchange rates on Arla’s pricing mechanism means there will also be a 0.35ppl negative impact on its milk price, taking its UK standard litre for October to 23.04ppl, or 0.03ppl higher than its August and September price.

The co-op’s revenues had been positively impacted due to improvements in the supply chain, “including recent developments in GDT auction prices, as well as initiatives from a number of our retail customers across Europe”, said Arla head of milk and member services Ash Amirahmadi.

But he warned that it was too early to confirm that the global market trend has reversed, he warned.

Arla Foods board director Jonathan Ovens added that the co-op had received a good response to its farmer-owned marque, which was launched last month and will feature on Arla-branded and Morrisons own-label dairy products. He said the marque enabled consumers to “easily identify and trust” dairy products that were “responsibly sourced from a farmer-owned business where all the profits go back to our owners”.

In an exclusive interview with the Grocer’s Dairymen supplement earlier this month, Arla UK boss Peter Giørtz-Carlsen said the business planned further NPD activity under the Arla masterbrand and a wider roll-out of the farmer marque over the coming months.

The dairy co-op will also unveil a radical new strategy during the autumn that will set out its development over the next five years, including plans to make the brand a top 10 food company in the UK by 2020.

NFU dairy board chairman Rob Harrison described Arla’s price increase as a “constructive move”.

 “This announcement by Arla is encouraging, despite being severely tempered by the decrease in the currency mechanism for UK farmers,” he said. “It is still an extremely tough time for dairy farmers as we move into the autumn and this upward movement must continue if dairy farms are to survive the winter, so I would urge Arla and other UK milk buyers not to take advantage of distressed sellers on the market.”