28 March 1997

MMlink to end as Unigate sets quality agenda

Unigate is to restructure its contracts with direct suppliers, introducing a range of schemes to encourage better quality and improved stockmanship. Philip Clarke reports

UNIGATE is to break the link with Milk Marque in its prices for direct suppliers and offer extra bonuses for quality.

Since Vesting day (Nov 1, 1994) the company has tied its constituent values to Milk Marques, topped up with a 0.8p/litre premium, guaranteed for three years as part of the Unigate Business Deal.

But that has now reached its "sell by date", according to head of agricultural affairs, Brian Pocock. Proposals for a new Business Deal, due to take effect from Nov 1, were sent to all Unigate suppliers earlier this week as part of an ongoing consultation.

One of the most radical changes is the treatment of butterfat and protein. "Milk protein has been getting out of step with its value in the (liquid) market for some time," explains Mr Pocock. "Some buyers have responded by capping. But we have decided not to go down that route, as we can still harness some of the protein value and we do not want to send out the signal that it is worthless." The company is also mindful that Brussels may be moving to milk standardisation (with all drinking milk having to contain a fixed % of butterfat and protein) and does not, therefore, want to totally lose the link between protein and price.

As such, Unigate plans to significantly reduce the value of butterfat and protein within the equation and, instead, pay out about half the milk value as a flat-rate base price. Actual rates will not be decided until September.

But the new schedule of bonuses and penalties is almost in its final form, offering top performing producers up to 2.4p/litre over the base value.

"There will be two ways of sustaining milk income above the going rate," says Mr Pocock. "By adding value – for example, better hygiene and stockmanship; and by lowering costs – for example, every-other-day collection and a more level production profile."

For instance, good TBCs (measured by Bactoscan) will, from Nov 1, pay 0.3p/litre for less than 20,000, 0.2p below 40,000 and 0.1p for under 60,000. But steep penalties will kick in at 100,000 with 5p/litre knocked off up to 200,000 and 10p deductions thereafter. (Currently, Unigate pays just 0.1p bonus below 100,000, with 0.1p deduction between 100,000 and 200,000 and 10p off above that.)

Similarly, for somatic cell counts up to 0.3p/litre bonus will be available for less than 150,000 and 0.1p below 250,000. But 0.1p will be deducted up to 400,000, with 10p off above that. "From July 1 this year, milk with counts over 400,000 will be deemed unmarketable under EU law," says Mr Pocock.

More level supply

Further bonuses will be available for delivering a more level supply to Unigate factories. In addition to the normal seasonality scales, there will be another 0.2, 0.35 or 0.5p/litre available to groups, determined by the "degree of levelness" obtained in each milk year.

That will be calculated by taking the average monthly delivery for the year and seeing how far above and below it the best and worst months actual figures have been. The maximum bonus will be available to those staying within   10% of their average, paid at the end of the milk year. "This should discourage dramatic fluctuations, especially at the end of the season, and reward good quota management."

Last, the new Unigate Business Deal will pay up to 0.6p/litre for meeting the firms new Superior Stockmanship standards, 0.5p/litre maximum group bonus and 0.2p/litre for Sovereign Suppliers (who achieve top standards consistently throughout the year).

"The superior stockmanship scheme is all about achieving measurable standards of stockmanship, animal welfare and farm appearance, not just worthy words," says Mr Pocock.

Points system

Payment will be based on a points system, with farmers assessing their units themselves twice a year. (Unigate is running over 100 training courses this year to show suppliers how to do this.)

These will be backed up with annual inspections by Unigate field staff to check the farmers claims are accurate.

On the deductions side, the company is also revamping its transport costs, doing away with any litreage charge and offering a strong incentive for alternate-day collection. The rates from Nov 1 will be £9.50 a collection for every other day, £14 a collection for every day and £19.50 a collection for those with restricted access.

While these rates are more than the maximum charges under the current deal, Mr Pocock is quick to point out that the alternate-day charge of £9.50 is per visit, not per day.

"The new Unigate Business Deal is very much a progression of what has gone before and follows almost a year of consultation," he adds. "It aims to strengthen the link between farmers and the market, with rewards for those producing to the highest standards." &#42

Brian Pocock… Breaking the link with Milk Marque prices.


Maximum bonuses (p/litre)

CurrentNov 1

1997

TBC (Bactoscan)0.10.3

(<20,000)

Somatic cell

count0.10.3

(<150,000)

Level plus-0.5 ( 10%)

UQMS0.1-

Unigate premium0.8-

Superior

stockmanship–0.6

(White Gold

Service)0.15-

Maximum group

bonus0.50.5

Sovereign supplier-0.2

Total bonuses1.752.4