ALL OF Scotland's milk buyers should take a lead from Arla's move to increase its milk price by 1.44p per litre from July 1, NFU Scotland said this week.

The union’s milk committee chairman James Rankin said: “Arla raising its price is very welcome and, at last, an acknowledgement that the dairy markets have strengthened. Scotland’s dairy farmers, after sustaining a very long period of extreme price pressure, must receive as much of the benefit as possible of stronger markets to rebuild balance sheets and confidence.

“Arla’s price is viewed as barometer for the UK milk price, and we would want this upward move to be followed quickly by all other milk buyers," said Mr Rankin. “NFU Scotland is very aware that the Arla price is based on its performance across all it global markets. There is no hiding place for the farmer owned co-op and its price will reflect not only the market, but the Arla management’s ability to return value to its farmer owners.

“Any processor who values a sustainable, loyal supply base must ensure they pay the best price they can, rather than the lowest they can get away with," he stressed.

The levy board AHDB Dairy has recently updated its cost of production model indicating that even the best 25% of producers are incurring an average cost of more than 26p per litre, noted Mr Rankin, while market indicators suggest that all buyers should be capable of delivering a farmgate price close to 28p.

"Arla is now achieving that and all milk buyers must follow on,” he said.

The move by Arla Foods is actually based on a two eurocents per kilogramme rise – taking account of currency and cash flow adjustments, that equates to 1.44ppl for UK producers, taking their standard litre price to 29.17p.

Arla Foods amba board director Jonathan Ovens said: “This will be welcome news for our dairy farmers that we are reflecting current market returns from rising fat prices in our July price.

“The current market situation is characterised by strong demand and low stocks of fat, which is driving up prices for butter, cheese and other products containing fat. The market for protein is also firming, however at a low level.”

As The Scottish Farmer went to press, it was understood that a price move by Muller UK might be on the cards for next week.