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Dairy Crest and Arla Withdraw Plans to Reduce Milk Prices

U.K. milk producers including industry leader Dairy Crest Group Plc and Arla Foods amba dropped plans to reduce prices paid for milk next month after protests by farmers.

Cuts scheduled for Aug. 1 will be delayed for two months, Esher, England-based Dairy Crest, the U.K.’s largest milk producer, said in an e-mailed statement dated yesterday. First Milk Ltd., located in Paisley, Scotland, will “immediately withdraw” plans for reductions, Chief Executive Officer Kate Allum said in a statement on the cooperative’s website.

U.K. dairy farmers staged dozens of protests across the country since mid-July after leading processors announced plans to cut milk prices below production costs, according to the Stoneleigh, England-based National Farmers Union. Retailers including The Co-operative Group, William Morrison Supermarkets Plc and Wal-Mart Stores Inc.’s Asda unit have agreed to increase prices they pay for milk.

“In genuinely difficult times for the dairy-farming and milk-processing sectors in Britain, Dairy Crest has shown tremendous commercial statesmanship,” Clive Black and Darren Shirley, analysts at Shore Capital Group Ltd., said in an e-mailed report. The investment bank and stockbroker advises buying Dairy Crest shares.

Robert Wiseman

Arla canceled plans for cuts after it “recovered money from its customers,” according to an e-mailed statement from the Viby, Denmark-based company. Robert Wiseman Dairies, which was bought this year by closely held German dairy company Unternehmensgruppe Theo Mueller GmbH & Co. KG, said prices will remain unchanged as of Aug. 1 rather than dropping.

Dairy Crest sells Country Life milk and Frijj flavored milk beverages, while Arla is known for its Cravendale brand. Robert Wiseman makes Black and White milk.

“Dairy farmers have spoken with one voice over the last few weeks, and they’ve made it clear that they reject the existing model where they are price takers and favor working together to gain an equal seat at the negotiating table,” First Milk’s Allum said.

Farm groups will continue to pressure other leading retailers and processors that have left milk prices at unprofitable levels for dairy producers, NFU President Peter Kendall said in an e-mailed statement.

Arla said it will pay farmers who are not aligned with retailers 27 pence (42 U.S. cents) a liter of milk.

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