Arla launches milk sourcing model

In a move to build confidence in the British dairy industry and with the support of Arla’s strategic customers, AFMP is taking a major step towards adopting a more transparent milk pricing and sourcing strategy with the launch of its  milk sourcing model, the company reports.
Key elements include: Confirmation of the recent communication to its members of a significant increase in Arla’s standard litre price to 29.5ppl from 1 October, which will be delivered through snticipated improved returns from its customers and markets, and support from its strategic customers to share all liquid milk premiums for the benefit of all AFMP members not on a formulaic model.   Asda DairyLink, Tesco seasonal, Cravendale and the non-aligned premiums will be incorporated into the Arla standard litre pric. Arla is also offering full support of the new voluntary code of practice, and “recognition of the recent achievements of dairy farmers and a commitment to engage with the coalition to find common ground on the 10-point plan.”

In 2013, a transparent and sustainable pricing model will be delivered, the dairy giant says, including a range of contracts to suit the needs of dairy farmers, and the adoption of Arla Foods amba’s practice of monthly price announcements to smooth the transition of milk price, along other developments. The milk sourcing model will allow Arla to share with 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% of the AFMP milk pool.
It is confirmed that with effect from 1 October, Arla’s standard litre price will be 29.5 pence for AFMP members in the non-aligned, Asda and Tesco seasonal milk pools.  The TSDG and SDDG milk prices will continue to be formulated in accordance with the existing pricing models.
Speaking about the announcement, Ash Amirahmadi, Arla’s head of milk procurement, says:  “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.”
Additionally, the board of MPL will begin the process, in Autumn 2012, of defining and agreeing the criteria for AFMP to achieve full membership of Arla Foods amba, the result of which will give much needed clarity to AFMP members on the approximate timescales and level of investment required, but also of the benefits.  Members will then have a choice to continue on the road to amba membership, in a way that is acceptable to members and Arla Foods amba, or take a direct supply contract with Arla in place of their existing contract.
Speaking about Arla’s and AFMP’s launch of the milk pricing model, Peter Kendall, president of the NFU says: “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.”
David Handley, leader of Farmers for Action, says:  “I’d like to congratulate AFMP for all their hard work and thank Arla for demonstrating leadership in the industry in these tough times.”