First Milk, the British farmer-owned co-operative, announced on Friday (February 23) that its milk price for March would be reducing by 1.25p per litre.
Arla, the dairy co-operative with 2,500 members, has also just revealed that its price for conventional milk would reduce by 2.16p for the manufacturing litre, taking it to 27.11p from 1 March 2018. Since December, Arla farmers have seen a total drop of 5.19ppl. Its farmers are paid on constituents, via a manufacturing schedule, which means they would receive 26.08p, based on 4% fat and 3.3% protein.
The NFU is urging Arla to speed up its commitments to looking at risk management options for its suppliers. It is also calling on Arla to clearly explain why its current plans are not preventing steep price drops.
“I’m disappointed and surprised to see this level of price drop again despite a stable demand for butter and the UK Futures Market Equivalent showing a positive result on the forward curve," said NFU dairy board chairman Michael Oakes. “We will soon see Arla’s seasonality pricing mechanism lower the pence per litre received even more.
Arla revenue
“Just this week at the NFU conference, Arla announced a growth in revenue of £1.94bn. Arla farmers don’t appear to be feeling the positive effects of this revenue or the strategy to manage risk in the market. We want to see more done at both ends of the chain to insulate farmers from such steep price drops.
“It is vital that Arla works with farmers to provide them with the ability to mitigate the effects of volatility on their businesses. We are holding Arla UK’s managing director Tomas Pietrangeli to his commitment made at NFU conference to look into risk management options for Arla suppliers. We are calling on Arla to speed up this work so farmers can see the results.”
The NFU Dairy Board was due to meet with Arla later in the year and would be reinforcing this call, it said.
Department for the Environment, Food and Rural Affairs average farmgate milk prices for January fell by 3.2% from December, to 30.60ppl.
The figures represent the average price paid by dairies for all milk purchased in the month. It is a weighted average calculated from information collected on total value and volumes of purchased milk in England, Wales, Northern Ireland and Scotland.
Disappointing
Jim Baird, vice chairman and farmer director at First Milk said: “As we’ve said in recent months, the weaker dairy market has impacted our revenue and we can only pay a milk price that relates to our returns. We know that this further milk price drop will be disappointing to our members and continue to do all we can to mitigate the market conditions.”
Arla Foods amba board director, Johnnie Russell, said he recognised this was unwelcome news for its farmer owners.
“The challenge that we face is that our price, in common with those or our competitors, has been impacted by the recent dramatic falls in the commodity markets from the highs of last autumn,” he said.
Arla said that while last year’s increases were driven by fat, the long-term decline in the value of protein since the start of 2017 has had a significant impact. It said that protein prices were now at a historical low with little prospect of recovery, due to the large stocks held by the EU.
Uncompetitive
Meanwhile, NFU Scotland vice president Gary Mitchell, a dairy farmer from Stranraer who currently supplies Arla, said the price takes the milk price down to a very uncompetitive UK price.
“That is very disappointing for Arla suppliers who are also owner members of the co-op,” he said. “As a company that rightly prides itself on its global exposure, added value brands and innovative initiatives, this price does not reflect the ambitions or expectations of its farmer owners, nor the wider dairy community.
“As a co-op which judges itself on its ability to generate returns to its farmers, then there must be a case for Arla elected farmer leaders to hold the management to account over this unacceptable price. Given the additional retail contracts that Arla have recently secured in the UK, members are right to question whether these deals have been won at a cost to producers.
Arla pledged to build the UK dairy industry as it revealed group 2017 results earlier today (February 23).