UK milk price increases not milestones, just PR – analyst

In recent weeks, Arla Foods UK and Robert Wiseman Dairies have announced plans to increase the standard price they pay to dairy farmers for their milk. Dairy Crest is also confident that it will announce an increase in the price it pays to its suppliers soon.

All three processors were targeted by farmers protesting against planned milk price reductions this summer. Arla Foods called its decision to increase its farm gate milk prices an effort to “build confidence in the British dairy industry”​ following the demonstrations.

Robert Wiseman Dairies also launched a trust-building project – the Wisemilk Initiative – earlier this month.

Despite this, Rabobank dairy analyst Kevin Bellamy told DairyReporter.com that the price increases should not be referred to as a breakthrough.

PR value​

“I think these UK dairy processors are looking at the current environment and thinking ‘we’re going to keep getting hammered if we don’t do something’,” ​said Bellamy referring to the continuing demonstrations.

“So increasing prices while they have the money is a bit of PR value.”​

According to Bellamy, cream prices – and, as a result, butter prices – have recently increased which has resulted in more money “in the system.”​

“UK processors have also had to deal with militant farmers, milk is in short supply and as a result exports are going to slow. There isn’t much product on the market so prices are going up,” ​he added.

“This is good time for processors to honour their promises. So I’m not sure we can call these price increases a milestone. Perhaps you could say the industry is turning a corner, but this is not unexpected considering that there is a bit more money in the system.”​

“It will be interesting to see what happens with Arla Foods, Robert Wiseman Dairies and Dairy Crest, and where they will go next,” ​Bellamy added.

Farmer pressure​

The announcements follow a summer of protests driven by a series of August-scheduled dairy processor price cuts.

Arla Foods UK was the first of the UK’s major dairy processors to crumble under farmer pressure. Earlier this month, it increased the standard milk price it pays to its dairy farmer supplier by 2.5ppl, from 27ppl to 29.5ppl.

Robert Wiseman Dairies since increased the price it pays for milk. The Scotland-based firm increased its farm gate milk price to 29ppl – an increase on the 24.73ppl proposed by the firm in June 2012.