The boss of Arla has said that supermarket milk prices need to rise by about a third to cover spiralling costs as the dairy co-operative said it would start exporting British milk overseas where farmers can get better returns.
Arla said that as part of its five-year strategy it was “calling time on cheap milk” and would end contracts that did not pay a return for farmers who needed to invest in their farms. The co-operative said that it was increasing its investment by more than 40 per cent to about £3.4 billion across its European operations.
Arla is Britain’s largest dairy company and fourth biggest food producer, with 2,100 farmers in the UK, meaning one in four British dairy farmers are part of the Arla co-operative. The business, which produces 3.3 billion litres of milk a year in the UK, also owns the Cravendale, Lactofree, Lurpak and Anchor brands.
Ash Amirahmadi, managing director of Arla Foods UK, said that the UK liquid milk market was “not sustainable. It is made even more critical by the fact that the costs of producing milk are increasing like never before.”
As a result Arla has said it will start exploring opportunities to export its raw milk to overseas markets. International milk prices are about 15 per cent higher than liquid milk prices to UK dairy farmers.
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Arla has increased its farmgate prices by 36 per cent but many farmers are still not breaking even, prompting some to reduce production next year. As the average price paid by shoppers for a litre of milk last year was less than it was in 2012, Amirahmadi said that it was “logical” that shop milk prices should have to increase by about 30 per cent.
Supermarket milk prices are heavily regulated and are often a main area of competition between retailers.
After years of growing supply, the rate of milk production fell by 4 per cent this month compared with a year ago, as many farmers are unable to afford higher feed and fertiliser costs, which is reducing yields.
David Christensen, who has 600 cows in Oxfordshire, said that higher costs of feed, fertiliser and fuel meant that it cost 44p to produce a litre of milk, compared with 28p a year ago, but the retail price of milk had been deflationary for years. “It is utterly barking mad that a bottle of milk is cheaper than a bottle of water — we need to see an increase,” Christensen said.
