Dairy Crest has re-launched its formula contract, boosting its milk price by 2.486p/litre for the start of the new milk year.
Farmers who sign up for the new core formula contract will be paid 32.56p/litre plus a 0.19p/litre early sign-up premium from 1 April.
On its current basis, the commodity-tracking formula would have fallen 0.686p to 30.264p/litre in April, as cream prices continue to fall.
Farmers who committed 100% of their milk to the contract, developed by Dairy Crest and suppliers group Dairy Crest Direct (DCD), have received -0.3p/litre less overall than the company’s standard liquid profile over 12 months.
Last year, 175 of the 1,100 farmers supplying Dairy Crest chose to have some of their milk priced by the formula and they will have to switch to the relaunched contract to take advantage.
The new core contract, including the April sign-up premium, puts the formula above Dairy Crest’s standard liquid price of 32.56p/litre.
It also reflects a new market environment where some processors, such as Arla, are starting to offer farmers more competitive global prices.
Dairy Crest group procurement director Mike Sheldon said this showed the company’s commitment to delivering a fair, competitive milk price.
“Our core formula contract has been successful in delivering complete price transparency and building trust in the pricing process, and we want to extend it and expand the number of farms signed up,” he said.
“We were really proud to be the first to deliver this model last year, which has reflected the movements in both dairy market and farm cost indices.
“However, the market environment for milk supply is different to last year and we have agreed with DCD that we will re-base it from April to ensure we remain competitive.”
The Dairy Crest/DCD formula tracks the prices of cream, four pints of retail milk, feed, fertiliser and fuel.
Like last year, suppliers on the core formula contract will be able to commit 25%, 50%, 75% or all of their milk for 12 months.
They can enter the core contract from 1 April, 1 July, 1 October or 1 January 2015, but only those signing up from April will receive the 0.19p/litre premium.
Dairy Crest is also offering a new simplified formula contract, without profile and with a lower butterfat requirement, though farmers will have to sign up 100% of their milk.
DCD chairman said he was pleased with the re-basing of the formula and the new liquid contract options.
“We remain committed to our joint formula initiative, which provides a transparent pricing mechanism,” he said.
“I am delighted we have also been able to deliver against request for a more straightforward milk supply contract and extend contract choice.”