The company made the announcement on Friday 22 January, noting that the cut will come into effect from 1 February 2016. When this reduction is applied to the UK standard litre it equates to a downward movement of 0.75p. This cut, combined with an extra adjustment of 0.05ppl in the forecasted supplementary payment Arla gives to its farmers, means the UK standard litre price has fallen to 21.81p.

Commenting on the reduction, Ash Amirahmadi, head of Arla UK milk and member services, said: “Global supply and demand continues to be out of balance. The emerging dynamic is the significant growth of milk supply in Europe, particularly driven by the Netherlands and Ireland.”

Amirahmadi added that these factors, combined with the “seasonal dip in revenue post-Christmas”, is affecting the entire dairy industry and has placed further downward pressure on Arla’s on-account price.

“We are doing everything we can to further reduce our costs, not just in the UK but throughout our global business,” he said.

Volatility

Dairy markets are still experiencing some volatility in the early part of 2016, as evidenced by the second consecutive drop in the Global Dairy Trade auction this week.

Despite this, the majority of dairy processors in Ireland have managed to hold their milk price for December, with LacPatrick even paying a 1c/litre and 1p/l bonus to its suppliers for the month.

However, in a sign of continuing difficulties on dairy markets, Irish processors offered skimmed milk powder for EU intervention at the beginning of this month, for the first time since October 2015.

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Ireland increases skimmed milk powder offered to EU intervention scheme