Milk price row: Arla Food UK announces 2.5p price rise

An initial plan by Arla Foods to cut prices led to protests by farmers

A dairy processor in West Yorkshire has announced an increase in the amount it pays farmers for their milk.

Leeds-based Arla Foods UK said its standard litre price would rise from 27p per litre to 29.5p from 1 October.

The decision, which has been welcomed by farming groups, follows protests outside Arla's Stourton plant by farmers campaigning for fairer prices.

It comes as an agreement is reached on a new voluntary code of practice for future contracts for milk supplies.

Dairy UK says a deal with the National Farmers Union (NFU) and NFU Scotland will help promote "trust" between milk producers and buyers.

In July, following the protests and discussions with customers, Arla Foods decided to abandoned a planned price cut.

'Difficult time'

The company said it hoped the October increase would "build confidence in the British dairy industry".

Ash Amirahmadi, head of milk procurement, said Arla wanted to "deliver a price and a sustainable sourcing strategy that step changes the returns for our members, restores confidence and... where all farmers benefit equally from the returns from our customers".

Whether the increase will result in price rises in stores was a matter for retailers, Arla said.

Arla's farmers will soon receive 29.5p per litre of milk

David Shaw, a dairy farmer from North Yorkshire, said the increase was "very good".

He added: "Unfortunately our customers will have to pay more and I think because of the recession it's going to be a very difficult time, but I hope that people will understand that farmers do need to be paid a reasonable price in order to continue in business."

Peter Kendall, president of the NFU, said: "We laid down the important challenge to milk buyers to reverse the milk price cuts and find a better way of doing business with farmers.

"Arla has responded to this challenge in a transparent and meaningful way.

"However, what is important to dairy farmers is that price increases are lasting and industry wide."