19 June 1998

MM 90% rule change attacked

DAIRY company representatives have slammed Milk Marques proposals to change the so-called 90% rule used in the selling of raw milk, saying it brings uncertainty to an already flawed system.

The rule requires Milk Marque to re-offer milk at lower prices if buyers bid for less than 90% of supplies in any selling round. Milk Marque maintains buyers take advantage of this ruling to source cheaper milk.

This is despite another rule which attempts to make buyers bid for realistic volumes. Those requesting a 10% or higher increase on supplies in a subsequent selling round are penalised. To avoid that, they bid for 80-90% of the volume they actually need, thus triggering a new, cheaper selling round without penalty.

Abolishing the 90% rule would remove that safety zone, and could force dairy companies to bid for milk at higher prices than the market justifies or face big penalties, says John Price, director general of the Dairy Industry Federation.

"Given the assurance agreed between Milk Marque and the OFT, it seems reasonable that the old rules should apply, rather than picking and choosing the ones that suit."

Paul Beswick, Milk Marques managing director, says milk prices cannot remain at current, unsustainable levels. "Changes need to be made in time for the July 1998 selling round. I hope that change can be agreed, but time is rapidly running out. We have been consistently underbid in every selling round since the introduction of the 90% rule."

Scottish Milk chairman, John Duncan, would welcome any action by Milk Marque to resist the 90% rule. Scottish prices are governed by those achieved by Milk Marque and the 90% rule places an added burden on producer prices, he says.

SMs average price for May milk was 15p/litre, 3p less than this time last year. &#42