Dairy giant raises price for conract producers

The big jump in price is based on a complex formula agreed earlier this year between the company and dairy farmers elected to represent all Müller Wiseman Milk Group members.

However, suppliers on ordinary contracts with the company will continue to receive the standard price, currently 31.5ppl.

One of the first to welcome the increase in price and the method bringing it about was NFUS milk policy manager George Jamieson, who said: “As an organisation that championed the introduction of market-related formula pricing, this latest price announcement by Muller Wiseman recognises the current strength in dairy commodity markets and delivers an appropriate price.”

Jamieson told other milk buyers within the industry to “sit up and take notice” of the way the price was calculated. “A milk price of around 34 ppl should be the norm and not the exception,” he said.

He added that there was a growing frustration among dairy producers due to the reluctance of milk processors to raise farm-gate prices, despite dairy commodity prices reaching a historical high on the world market. He also highlighted the time of year, as supplies of milk are traditionally at their lowest in the autumn.

On the first anniversary of big milk farmer protests last year, which eventually produced a voluntary code of conduct on pricing, Jamieson said: “Once again, there is a suggestion that the reliance of GB on liquid and cheese and big retailers and processors means that our supply chain still fails to react to markets effectively.

“Farm-gate prices, although having risen over the year, are now behind where they should be given the strength of product values and this Müller Wiseman price is reflective of the true marketplace value of milk.

Martin Armstrong, for Müller Wiseman Dairies, said the formula price would perform very well in a strengthening market for global dairy commodities but he warned that it could equally suffer a sharp correction if commodities declined in value as they did last year.

He added: “Dairy farmer members were given the option to opt in to this formula in line with their attitude to risk and many have chosen to hedge by committing a portion of their output to the formula whilst maintaining the rest of their supply through the Müller Wiseman Standard Price, which is less volatile and reflects competition in the fresh milk sector.

“The prices of both options are extremely competitive and benefit from an additional production incentive of up to 1ppl.”