Huge milk price drop to below 40p/litre for Arla farmers in April
© Tim Scrivener Producers supplying Arla will face a 5.3p/litre price cut in April as a result of the large availability of milk in the UK.
Arla’s farmgate milk price will fall to 39.64p/litre for a standard manufacturing litre from 1 April, while organic producers will receive 44.42p/litre.
This price cut comes just a month after Arla Foods UK announced a 17.5% rise in its revenue in 2022, to total £2.6bn.
See also: Milker trade back £100-£300 amid milk price cuts
The farmer-owned co-operative suggested that an increase in milk supply and reduced consumption was behind the price cut.
Looking forward, Arla anticipates markets will stabilise as commodity markets get closer to balance.
Arla Foods amba board director and Arla farmer Arthur Fearnall said: “While some prices for dairy categories are seeing early signs of levelling out, the severity of the ongoing cost-of-living crisis and volatile economic environment is continuing to negatively affect consumer demand for both conventional and organic milk.
“As a result, commodity prices continue to decline significantly, especially as global milk volumes increase overall.”
Paul Savage, Arla’s agriculture director, added that milk supply in the UK had continued to grow in the past month, with output up 3.2% compared with March 2022.
“This increase has not only been seen in the UK, but also across Europe and the globe.
“When coupled with a decline in dairy consumption and an overall decline in shopping spending, with 75% of people cutting expenditure on food, this is creating a change in the supply and demand of milk,” said Mr Savage.
Further price cuts are expected by other processors in the coming days.
Tesco to return to cost of production pricing
Producers supplying Tesco through its sustainable dairy group will receive a May milk price of 43.51p/litre for those on Muller contracts, and 43.26p/litre for Arla contracts.
The supermarket chain has decided to revert back to its quarterly cost-of-production pricing model for more than 500 of its producers, which takes into account input costs, including feed, fuel and fertiliser.
It had previously been boosting prices since July 2022 in order to offset significant inflationary pressure for producers.
Tesco’s latest overall cost of production estimate is up by just over a penny for May to 43.51p/litre, after accounting for overheads, depreciation, and variable costs.