18 January 2002

Dairy firms cut on-farm prices

By Robert Harris

MORE milk companies are cutting ex-farm prices to reflect weaker commodity markets and poor spot milk values.

The Milk Group has reduced its ex-farm price by 1.95p/litre, backdated to Jan 1. According to FARMERS WEEKLYs Milk Price Review, this takes the standard litre price for every-other-day collection down to 17.75p/litre.

"We knew the spot market was coming under pressure, but it collapsed," says the companys Richard Sheard. "This price cut is exceptionally disappointing."

The company had been paying 20.65p/litre for EODC milk for the first half of the current milk year, making it one of the best payers. But, after rapid expansion, the Milk Group cut prices by 1p/litre in October and this latest reduction will push it towards the bottom of our Milk Price Review.

Zenith, which intends to merge with the Milk Group from April to improve farmers returns, has informed its members of a 1p/litre price cut in its flat rate payment, also from Jan 1. This takes the value of a FARMERS WEEKLY standard litre to 18.91p/litre for EODC, and about 0.5p/litre less for EDC. The company blamed higher-than-expected milk volumes, resulting in forced sales onto a weak spot market.

Express Dairies has cut its flat rate payment by 0.3p/litre, taking its farm-gate price to 20p/litre (every-day collection). Most of the companys milk goes to the liquid milk market, where prices have remained stable.

But some surplus fat is exported as cream to the Continent, and the rest is turned into butter, where values have fallen to intervention levels. It is price pressure in these sectors that has triggered the latest price cut, says EMP chairman, Jonathan Ovens.

"We had some tough negotiations with Express at the end of last week, and managed to minimise the cut. And we said we were not into retrospective pricing, so the cut will apply from today (Jan 14), rather than the beginning of the month."

Other dairy companies have already announced cuts for ex-farm January milk, including Nestlé and ACCs Welsh creameries (both by 1p/litre). Milk Link lowered its price in December by 0.5p/litre.

&#8226 Robert Wiseman Dairies has announced bonuses worth an average of £800 for 500 of its direct-supply farmers.

The money is for those in central Scotland, the north of England and Wales who took part in a three-month volume bonus scheme, which began in October, where they were promised an extra 3p/litre over Wisemans standard price for production over and above last years levels.

The bonus, introduced to help Wiseman combat the anticipated milk shortage at the end of last year (which never materialised), will be paid in the coming few days along with December milk cheques. &#42