Arla Foods has secured a 50% increase in the amount of milk sourced through its Arla Foods Milk Partnership direct supply arrangement.
The development means that from September, AFMP will supply 75% of Arla’s milk requirements, or 1.65 billion litres of the 2.2 billion litres it buys every year.
AFMP chairman Jonathan Ovens said: “This is good news for Arla, for AFMP and for the producers who have joined us.
“It reflects the fact that farmers take a long-term view of the future. They are attracted to the security of the AFMP contract, they appreciate the continued investment in the supply chain by Arla, and value
the long-term development of brands such as Cravendale, Lurpak and Café Met. This all comes on the back of success in recovering cost increases from the marketplace, a benefit to date only really seen for direct suppliers to liquid processors such as ourselves.
“Over the past 11 years, AFMP has delivered to its members a price consistently at the top of the market. Existing members have the confidence to increase production on the back of a partnership deal that guarantees a secure market and a premium price for their milk.”
But Arla’s recruitment is bad news for dairy co-operatives, from whose ranks many of the AFMP suppliers will be drawn.
David Lattimore, consultant and former buyer of milk from co-ops for Unigate and Dairy Crest, said: “More pressure is put on co-ops whenever they lose volume as they have relatively fixed loans and overheads to cover. The greater the volume collected, the lower the cost per litre, the easier the loans can be serviced. The smaller the volume, the more onus on the producers who remain.”
Richard Clarke & Chris Walkland