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Stackyard News Jun 06

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    NFUS Slams ARLA Price Cut And Strategy

NFU Scotland has described Arla's latest price cut as a knee-jerk reaction to the company's poor financial results and symptomatic of a strategy to drive producers out of the industry. The Union has urged the rest of the sector to isolate the company and not react to its attempt to drive down the UK milk price.

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NFUS has accused Arla of attempting to 'spin' its way out of trouble by hiding an average cut of between 0.6-0.7 pence per litre in complicated calculations related to butterfat content and individual production profiles.

The Union is today writing to the Chief Executive of Arla's Danish parent company, Arla-Amba, requesting a meeting in Scotland to explain the Arla strategy for the UK dairy industry. This follows completely unsuccessful attempts to have the same discussions with its UK representatives.

The Union has also challenged the supermarket Asda, which sources milk through Arla, to explain how this downward pressure fits with its promise to treat dairy producers fairly.

NFUS Vice President Jim McLaren said:

"Frankly, the claims by Arla that this move has nothing to do with its disastrous financial results are an insult to dairy farmers. If other processors can post multi-million pound profits from liquid milk, then there are serious question over Arla's efficiency. It is passing on the penalty for its financial mismanagement to farmers. And for hard-pressed producers already considering their future options, this could drive them out of the industry.

"Other processors must not take Arla's bait and drop price themselves. Retail prices are firm and there is no justification for further drops, other than to bolster their own margins. Worse still, the supermarkets could come in and pocket the extra margin themselves.

"This is not about an industry supply problem, it is about an Arla management problem. The company has been signing up more and more direct suppliers despite demonstrating that it can't manage that supply."

Chairman of the NFUS Milk Committee Willie Lamont said:

"Arla has also blown Asda's promises to the dairy industry out of the water. The supermarket has been triumphant in its claims of massive price cuts for shoppers, whilst apparently protecting farmers. Yet, its retail cut has not only demonstrated the huge margins been made by supermarkets, but has shown Asda's apparent willingness to watch farmers get financially crippled.

"We have had hollow words from Arla's UK representatives and we have had enough. We are now asking for a meeting with the Chief Executive of its parent company in Denmark. We believe, from the evidence, that Arla UK's strategy is to drive dairy farmers here out of business so it can import more cheaply from elsewhere. If we are wrong, then Arla-Amba's CEO can come and tell us why his company is not the destructive influence we believe it is."

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National Farmers' Union
NFU Scotland