Arla milk price cut is 'yet another major setback'

Arla has announced that it will cut the price it pays to its UK members by 0.84p from May 25 taking their standard litre price to 24.99p.

Reacting to the price cut, NFU dairy board chairman Rob Harrison said: “Arla’s announcement is yet another major setback when UK milk prices are already at unsustainably low levels with many of our dairy farmers in dire financial difficulties, struggling to see a way through the next few months.

“I cannot emphasise how important it is that other processors base the price they pay their farmers on their own product mix and continue to search for maximum value throughout the supply chain, rather than idly following one another to the bottom.

“Global markets, which rallied in January and February, have fallen back again, with this week’s global trade auction falling by 2.2 per cent, leaving commodity markets in the worst position we have seen in years. We have passed the UK spring flush peak and spot prices have improved slightly but there is little respite on the horizon for the dairy sector and it is going to be intensely painful for a lot of dairy producers in the short term.

“Despite the bleak outlook, thankfully we still have the support of the British public. I’d urge them to keep on buying British dairy products, including cheese, butter and yogurt and look out for the Red Tractor logo. Farmers appreciate all the support from shoppers who continue to back British farming.”

Recently, Dairy Crest announced a 59% drop in its pre-tax profits after its milk operations continue to suffer in the difficult market conditions.

The company said its revenue was down 4%, and will soon be selling its dairy operations to Muller for £80m.

In 2013/14 pre-tax profits at the dairy company were £54.2m, today they were reported as £22.1m.

"We have agreed to sell our Dairies operations," said Mark Allen, Chief Executive, said.

"The conditional sale is a positive development for Dairy Crest and the wider UK dairy sector. Shareholders have approved the sale and the process to obtain regulatory approval is on track."

"Looking ahead, Dairy Crest is well positioned for sustainable, profitable growth. Over the coming year as a whole we expect results to benefit from the continued growth of Cathedral City, ongoing cost savings and the completion of our project at Davidstow where we will add value to our whey stream by producing ingredients for infant formula. This growth will be second half weighted.

"We expect that our net debt, which at the year end remains within our target range, will fall once we have completed our major investment projects. The receipt of the proceeds from the sale of our Dairies operations will accelerate this reduction."

"Our focus on product development has underpinned these results and our investment in a new innovation centre will support this. We have again met our target to deliver annual cost savings of over £20 million. These include consolidating our butter and spreads production onto one site."