Tuesday 25th Jun 2019 - Logistics & Supply Chain

Arla sets out new milk sourcing model

Arla Foods Milk Partnership has set out plans to adopt a more transparent milk pricing and sourcing strategy with the launch of its milk sourcing model. As a result, Arla’s standard price will rise to 29.5ppl from 1st October.

Dairy farmers have staged a series of protests over the past couple of months saying that were losing up to 3ppl on milk used in dairy products such as butter and cheese. The Co-operative has already said it is increasing the price it pays for milk.

Arla Foods Milk Partnership (AFMP) currently supplies some 90 per cent of Arla Foods’ raw milk requirements.

The  company said the new sourcing model would allow Arla to share with AFMP members the benefits of retailer aligned contracts by pooling the retailer premiums which, in turn, will give better returns to all AFMP members whose price is not set through a formulaic model. This covers approximately 75 per cent of the AFMP milk pool.

Peter Kendall, president of the NFU welcomed the move saying: “On behalf of the dairy coalition, we laid down the important challenge to milk buyers to reverse the milk price cuts and find a better way of doing business with farmers. Arla has responded to this challenge in a transparent and meaningful way.

“On the same lines as the coalition and SOS dairy, Arla’s plans are about putting dairy farmers in the driving seat which is why I welcome and support these proposals. However, what is important to dairy farmers is that price increases are lasting and industry wide.”

Ash Amirahmadi, Arla’s head of milk procurement, said: “The coalition has been successful in raising public awareness of the plight of farmers in a way that we couldn’t. We believe it is our duty to take over the baton and deliver a price and a sustainable sourcing strategy that step changes the returns for our members, restores confidence and takes a major step in moving AFMP towards the cooperative model of Arla Foods amba, where all farmers benefit equally from the returns from our customers.”

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