The Arla Foods amba on-account price will reduce by €2 cents per kg with effect from 29 September 2014.
In addition, the next quarter’s currency exchange rate takes effect and this will result in a 0.03ppl reduction in the UK price. When both factors are applied to the pricing mechanism, this equates to an overall 1.67 pence reduction in Arla’s UK on-account price.
The forecasted 2014 13th payment has reduced to 0.65ppl, as a result of it being rebased in line with the company’s quarterly reforecast. This incorporates a fall in turnover, which results in a lower net profit and an increase in milk volumes. The fall in turnover is largely as a result of reduced commodity selling prices. Changes to the forecasted 13th payment do not impact on the monthly milk cheque. The 13th payment will continue to be reforecast with the actual 2014 figure being confirmed typically in February 2015.
As a result of the downward movement in the milk price, the slight change to the currency smoothing exchange rate and the reduction in the 13th payment, the UK standard litre, with effect from 29 September is 28.55 pence.
Commenting on the reduction, Ash Amirahmadi, Arla UK’s head of milk and member services said: “Globally, milk production has increased by circa four to five per cent, which is out of sync with a lower increase in global demand of circa one to two per cent. This imbalance is resulting in large stocks and, as a consequence, markets have dropped sharply.
“Furthermore, Chinese demand continues to be sluggish and the Russian import ban is continuing to have an impact on European industry prices. This negative pressure is having a significant effect on Arla’s milk price.”