The head of the UK's biggest dairy has warned that milk prices need to rise to cover a huge surge in costs for farmers. Arla Foods managing director Ash Amirahmadi said there could be supply issues unless farmers get better returns.
Arla has 2,100 dairy farmers in the UK and 8,950 across Europe. But Mr Amirahmadi said they can no longer cover their expenses because costs are increasing at rates never seen before.
Dairy farmers have faced rising fuel, fertiliser and feed costs. They are also paying more for labour and machinery.
Mr Amirahmadi told the BBC : "Because of the recent crisis, feed, fuel and fertiliser have rocketed and therefore cashflow on the farm is negative. UK dairy farmers have been producing more for about the last seven to eight years but it's now going the other way.
"The most important thing now is that we put our arm around the farmers…and pay our farmers more to cover their costs to make sure the milk is flowing."
Global demand for dairy could provide an opportunity for farmers in the UK, with prices paid to farmers around 15% higher. And Mr Amirahmadi said there would be "tough decisions" ahead about where the dairy's milk goes to ensure farmers can cover their costs.
He told the BBC: "The profitability of some of our milk contracts will need to increase significantly when up for renewal in order to compete with more attractive business opportunities that are opening up."
