Arla Foods amba has announced it is slashing its on-account price for members by one euro cent per kilo, with effect from February 1.
When this reduction is applied to the UK standard litre it equates to a downward movement of 0.75ppl.
There is also an adjustment of 0.05ppl in the forecasted supplementary 13th payment because of lower overall returns, due to the commodity market impact. These two adjustments, totalling 0.8ppl, take the UK standard litre price to 21.8ppl.
The announcement follows a decision by Muller to cut 1ppl from its farmer milk cheques, and warnings from NFU dairy board chairman Rob Harrison - himself an Arla supplier - that the industry faced a grim 2016. Warning have also come from NFU Scotland, which claimed many dairy farmers were on the brink of exiting the industry.
Ash Amirahmadi, head of UK milk and member services, said: “Global supply and demand continues to be out of balance. The emerging dynamic is the significant growth of milk supply in Europe, particularly driven by the Netherlands and Ireland.
“This, combined with the seasonal dip in revenue post-Christmas, is impacting the entire dairy industry and has placed further downward pressure on Arla’s on-account price.
“We are doing everything we can to further reduce our costs, not just in the UK but throughout our global business.
"Meanwhile, in the UK we are continuing to grow our branded portfolio and only this month we launched BOB, another Arla branded innovative new product, into the dairy category. Despite all of our efforts, we simply cannot buck global industry trends.”
Arla Foods amba farmer board director, Johnnie Russell, added: “As a farmer-owned business, with circa 3,000 British dairy farmer owners, we are extremely aware of the impact that this downturn in the markets is having at farm level. We have seen another drop in the GDT and are doing everything we can to help our farmer owners navigate through the uncertainty within the markets.”