Arla Foods UK will pay 25p a litre for milk supplied by members of its dedicated supply group, Arla Foods Milk Partnership (AFMP), from October 1st following a round of positive discussions with its major retail customers.
The increase was announced to AFMP members in a joint letter signed by Jonathan Ovens, AFMP Chairman, and Peter Walker, Arla Foods Group Director of Milk Procurement.
Following the announcement, Peter Walker said: "We have made good progress in our milk pricing negotiations and have agreed that the AFMP standard litre price will increase to 25ppl from 1 October 2007.
"This increase reflects the undertaking, given by the company to the Partnership, that Arla would seek to improve prices via one major increment rather than a series of small adjustments to milk prices over a period.
"We recognise that the situation remains highly volatile and will continue to monitor developments in the marketplace to ensure that Arla Foods' milk price as always reflects current market conditions and continues to be in the top quartile of milk prices being paid to UK dairy farmers."
Commenting on the increase, Jonathan Ovens said: "The partnership between AFMP and Arla and the close relationship that Arla enjoys with its key customers has put us in the position to deliver this much needed substantial improvement to our members' price.
"I am aware that Arla is continuing its hard work to deliver this substantial improvement to benefit all Partnership members in these current difficult times for all dairy farmers."
Discussions have centred around increases in on-farm production costs as a result of the difficult weather this summer and its subsequent pressure on feed costs for the rest of the milk year. Arla is also recognising the continued strength in the commodity markets in delivering this price increase.
This latest price rise comes on the back of three previous industry leading milk price increases announced during the spring and summer of this year and the suspension of balancing charges on excess litres from July 1st. This arrangement will continue until the end of 2007.