Arla Raises Milk Price to 29.5 Pence per Litre

UK - Announcing a more transparent milk pricing and sourcing strategy in line with the launch of its new milk sourcing model, Arla Foods has also confirmed that it will increase it's standard litre price to 29.5 pence per litre (ppl) as of 1 October 2012.
calendar icon 4 September 2012
clock icon 3 minute read

The milk sourcing model will allow Arla to share with members the benefits of retailer aligned contracts by pooling the retailer premiums which, in turn, will give better returns to all Arla Food Milk Producer (AFMP) members whose price is not set through a formulaic model. This covers approximately 75 per cent of the AFMP milk pool.

It is confirmed that with effect from 1 October, Arla’s standard litre price will be 29.5 pence for AFMP members in the non-aligned, Asda and Tesco seasonal milk pools. The TSDG and SDDG milk prices will continue to be formulated in accordance with the existing pricing models.

Speaking about the announcement, Ash Amirahmadi, Arla’s head of milk procurement, commented: “The coalition has been successful in raising public awareness of the plight of farmers in a way that we couldn’t. We believe it is our duty to take over the baton and deliver a price and a sustainable sourcing strategy that step changes the returns for our members, restores confidence and takes a major step in moving AFMP towards the cooperative model of Arla Foods amba, where all farmers benefit equally from the returns from our customers.

“We thank our strategic customers for their significant support and trust in helping us make this happen. We could not have achieved this without their help,” Mr Amirahmadi added.

The key elements include:

  • Confirmation of increase to milk price;
  • Full support of the Voluntary Code of Practice;
  • Recognition of the recent achievements of dairy farmers and a commitment to engage with the coalition to find common ground on the 10-point plan;
  • A transparent and sustainable pricing model to be delivered in 2013.

Commenting on the launch of the milk sourcing model, Jonathan Ovens, AFMP chairman, said: “We have worked tirelessly for a number of months to develop this model. We were fully aware when we announced a reduction in the milk price that it was not sustainable for our membership. The increase in cost of production is very real for members but we don’t believe that a cost of production model is the long-term answer because it would lead to a UK dairy market that is uncompetitive and at risk post 2015. The milk sourcing model has allowed us to improve returns to members, addresses their concerns and gives choice and confidence in their processing partner.”

Mansel Raymond, NFU dairy board chairman, added: “I am pleased to see Arla make the commitments they have today to non-aligned and aligned supplier farmers, as well as to Arla Foods Milk Partnership about the road that lies ahead towards cooperative membership. What dairy farmers need, going forward, is the commitment and recognition of the whole supply chain, so they can have confidence in the future.”

David Handley, leader of Farmers for Action, said: “I’d like to congratulate AFMP for all their hard work and thank Arla for demonstrating leadership in the industry in these tough times.”

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