April 24, 2013

 

Dairy Crest, Arla boost UK milk prices

 

 

UK milk prices are set to reach record highs as Dairy Crest and Arla Foods, two of the UK's leading dairies announced they would pay farmers more than £0.30 (US$0.46) for a litre of milk.

 

Dairy Crest, maker of Utterly Butterly and Cathedral City cheddar, said it would pay £0.315 (US$0.48) a litre to its farmers from June. The move comes in response to the rises in dairy market prices across the world following low levels of milk production.

 

Arla Foods, the Danish co-operative that makes Lurpak butter, has raised its price to £0.302 (US$0.46) "as a result of improved business performance and increases in global commodity prices".

 

Mansel Raymond, dairy board chairman for the National Farmers' Union (NFU), said the price increases were long overdue. "It's a help and a step in the right direction, and should set the tone for other major buyers to move quickly", he said.

 

However, he added that with the average cost of production above £0.32 (US$0.49) a litre, many farmers would remain under pressure in the months ahead, adding that it was a disappointment Dairy Crest's increases would only come into effect from June rather than May.

 

This week dairy farmers blockaded two Wm Morrison depots after concerns that First Milk, a cheese supplier to supermarkets, would lower the prices paid to milk producers.

 

The latest price rises come a year after producers banded together to protest as farm-gate milk prices hit £0.26 (US$0.40) in June and UK dairy processors proposed further cuts.

 

Since then poor weather across the EU, UK and US has hit milk production, forcing dairy prices to rise globally. A bad winter in Europe and dry weather in Australia and New Zealand have disrupted key global dairy producers. UK farm-gate milk prices averaged £0.30 (US$0.46) a litre in February – touching new highs for the industry.

 

Earlier this month, the UN Food and Agriculture Organisation said unusually large rises in dairy prices had been the cause of a 1% increase in its food price index during March.

 

The UK experienced its coldest March for more than 50 years, which stopped farmers putting herds out to grass and forcing them to buy in extra feed. Unseasonal weather has also increased the price of wheat feed, which now costs a fifth more than it did a year ago.

 

David Handley, chairman of Farmers for Action, which was active in milk price protests last summer, said rising feed costs were pushing farmers back into crisis conditions, while supermarkets continued to enjoy high margins on cheese.

 

A voluntary code of best practice intended to improve conditions for producers was launched in October, but the NFU said it had yet to be adopted across the industry, with about 15% of processors yet to agree to it.