Arla has handed 12 months’ notice to farmers on direct supply contracts as it struggles to deal with its surplus milk.
The move follows speculation within the industry in recent weeks about the future of the farmers not part of Arla’s co-operative model, which is reported to include up to 50 farmers and to represent about 40 million litres of milk supply each year.
A letter to producers has confirmed these suppliers will have their contracts terminated on February 28, 2017.
The move comes following meetings with Arla Direct farmers on February 10 and 11.
These discussed mitigating the surplus milk Arla expected during this year’s spring flush and the pressure the firm faced due to the significant supply switch by Tesco from Arla to Muller last month.
In the letter giving notice to producers, head of milk and member services at Arla Foods UK Ash Amirahmadi, said the company’s effort would continue to secure new business and reduce its surplus milk.
"We commit to giving you regular business updates," he said.
"If we are successful in winning enough new business so that our surplus milk is reduced to within optimal balancing levels we will contact you to discuss the option of a rescindment of the notice."
"Our strong desire is for us to be able to rescind the notice."
He added in the letter the firm may agree to the early termination of contracts by producers in order for them to find another purchaser.
Arla Direct farmers who spoke to Farmers Guardian following the announcement claimed the move would be disastrous for many. Some farmers suggested there could be increased needed for the services of rural charities.
The move came as Dairy Crest and First Milk both announced further cuts to prices, pointing to the continuing difficult situation in global dairy markets.