Wet weather ‘bonus’ for dairy farms

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In NORMAL times, milk processors attempt to push down the price they pay for milk at this time of year as cows benefit from the spring flush of grass. But in this very abnormal year, with grass slow to come away, the major buyers are finding themselves competing for short milk supplies.

In an attempt to counteract the tightening of supplies, most of the majors have in the past week indicated milk price rises.

Yesterday it was the turn of First Milk, with chairman Bill Mustoe revealing the company would be lifting the liquid pool price by a further 1p to take the standard litre price to 30.65p per litre (ppl). This would be done in two stages, with a 0.5ppl increase from 1 July and a further 0.5ppl increase from 1 August.

He also announced the company would hold its milk for cheese price at 28.9ppl. This is a complete turnaround from its position last month, when the company suggested it might have to cut the price of its cheese contract by up to 2ppl unless retailers paid more for cheese, a move which triggered a series of protests from dairy farmer all across the country.

In a further attempt to hold on to its primary producers, Mustoe said members with share capital in the company would be paid 3 per cent on that capital now and another 3 per cent later in the year, giving a 6 per cent return on capital.

First Milk also announced plans to recruit producers for a new contract. This market-driven contract will only be open to new members, and will provide a monthly milk price based on a rolling eight-week average price of skimmed milk powder and butter on the Dutch market.

In another move aimed at strengthening producer loyalty, Arla announced that between 1 July and 31 December 2013 it would pay a bonus of 5ppl on additional production above 2012 monthly volumes. The bonus would be paid on a monthly basis.

In making the announcement, Arla said this bonus would ensure its farmer suppliers benefitted from the company’s growing milk demand. The scheme was a more sustainable way of sourcing milk than purchasing it from external suppliers, it said.