0.87/0.9ppl Price Reduction for Arla Members – from 1st September
Posted on: 23/08/21
Arla members conventional and organic milk price will reduce between 0.87 and 0.9ppl (1 euro cent) from 1st September resulting in the following www.milkprices.com standard litre price.
Conventional Organic
Liquid Standard Litre 31.08 (-0.87p) 39.12
Manufacturing Standard Litre 32.30 (-0.90p) 40.66
This price reduction is the first Ian can ever recall, resulting from inflation and not down to the market conditions.
Clearly with where the Arla price has been to date they have been successful in getting price increases from the market but clearly they are insufficient to meet rocketing processing costs, hence the reduction.
All processors are wrestling with escalating costs which in less than 12 months, have seen plastics +50%, Palm Oil +50%, in addition to significant increases reported for road fuel, utilities (gas & electric), paper and glass bottles are like dogs eggs to get hold of.
A middle ground liquid processor confirmed to Ian that one sizable customer had resisted any price increases on either increased costs or the need to increase farmgate milk prices and they informed the customer to find another supplier. More of that will be needed to prevent the costs pushing back down the supply chain to the last domino in the line (AKA the weakest link and easiest to pick pocket) the dairy farmer who is experiencing similar inflationary cost pressures.
The market remains strong and if spot milk is a fair barometer then at 34 to 36ppl today (delivered in) it’s a strong market but very little traded daily and few customers.
So, whilst the market outlook reported by Arla is stable post the end of September, inflation on raw materials shows no sign of levelling and will have to be recouped.
To be fair its still a Champions League price and it will be interesting to see if any of Arla’s competitors feel the need or seize the opportunity to follow Arla’s lead or whether they can hold having been more successful in recovering their additional costs, but the smart money is on the other processors holding and not having to follow Arla. Watch this space in the next 10 days.