SCOTTISH dairy farmers are set to benefit from a £17 million investment in what will become Britain’s largest butter plant, announced yesterday by German dairy giant, Müller.
The company’s chief executive for the UK and Ireland, Ronald Kers, told the Semex dairy conference in Glasgow that the new plant at Market Drayton, Shropshire, due to be commissioned in the autumn, would have a manufacturing capacity of 45,000 tonnes of butter, utilising up to 90,000 tonnes of cream a year.
Müller, which a year ago acquired the East Kilbride-based Robert Wiseman liquid milk business, sees investment in butter production as a means of providing a hedge against volatility in the cream market.
Falling cream prices took an estimated £190m out of the milk market last year and triggered demonstrations by dairy farmers against low farmgate prices.
“Müller Wiseman is very exposed to the cream market and it hit our bottom line last year,” said Kers. “This investment will shield us from market volatility and give us more marketing options with another tool in the market to add value.”
Butter will be sold as a branded product in the UK, but Kers also sees scope for export. The UK has a £1bn trade deficit in dairy products, importing 102,000 tonnes of butter a year but exporting 37,000 tonnes.
Kers said the investment in the butter plant, together with the recent takeover of a business producing added-value desserts, would help Müller Wiseman maintain its position at the top of the milk price league.
The ex-farm price paid by the company to producers not aligned with supermarket contracts – representing a third of suppliers – is due to increase by 1p a litre on 1 February to 30.5p.
He admitted concern about milk supplies in the light of the exodus of producers from the dairy industry and last year’s adverse weather, and plans to launch a recruitment drive in the spring to attract producers.
“We need more milk and more dairy farmers to support us,” he said. “I hope our strategy of continuous investment in expansion and innovation and our commitment to pay a competitive and transparent price for milk, with no hidden deductions, will build confidence among producers.”
Müller Wiseman, he said, was honouring the voluntary code of practice, agreed by the industry last summer but being resisted by some milk buyers, by including a clause in contracts allowing producers to quit with only three months’ notice.
Challenged from the floor that the milk price still fell short of cost of production, which had been independently calculated at 33p a litre, Kers said he expected shortages to drive up the milk price further during 2013.
Lanark producer Ian Smith took issue with both Kers and another speaker, Peter Kendall, the president of the NFU for England and Wales, on the voluntary code of practice which he described as a “farce”. He called for the introduction of legislation to make the code stick.
However, Kendall said there was “not a hope in hell” of the government introducing legislation until the code was given a chance to work on a voluntary basis.