UK dairy processor Muller has increased its standard non-aligned milk price by 0.5p/litre.
The rise means the 700 Muller Direct producers will receive 30.5p/litre on its liquid contract with constituents of 4% butterfat and 3.3% protein.
The Muller price has now increased by 33% (7.6p/litre) compared with the same month in 2016.
“Global markets for dairy commodities like butter and cream are easing following the recent and unprecedented surge, with supply increasing and demand softening,” said Muller agriculture director, Rob Hutchison.
He added: “However, we remain committed to offering a competitive milk price at each stage in the global dairy market cycle and are investing heavily to add value to the milk we buy.
“We are also working with farmer suppliers to ensure that production is more closely aligned with the requirements of our customers, and to introduce and encourage the use of tools which are designed to help manage milk price volatility.”
Direct Futures contract
Muller also confirmed that 130 producers had signed up to its new 100m litre Direct Futures contract.
The 130 producers will be able to commit up to 25% of their annual milk supply for up to 12 months ahead into a fixed-price contract, linked to the UK Milk Futures Equivalent (UKMFE).
Non-aligned dairy farmers can choose between locking in at a fixed price for each month or taking the monthly market price derived from the European Energy Exchange (EEX) market monthly price.
Muller base price formula
The forward pricing formula will be calculated using EEX market prices for skim milk powder (SMP) and butter calculated independently by FC Stone/milkprices.com
This price will then be subject to the terms of the payment index, which takes butterfat, bactoscan, somatic cell count and graduated seasonality into account.
- 2p/litre for transport
- 0.55p/litre cost of hedging for Muller (if producer chooses to fix the milk prices in future months)
- 5% processor margin for Muller