8 August 1997

Price cut warning

MD FOODS has told its direct suppliers to expect a milk price cut of 1.5p/litre from Oct 1, the first major dairy company to declare its hand for the autumn.

The main changes (provisional at this stage) are a cut in the butterfat payment from 2.89p a % to 2.69p a %, and a drop in the protein value from 3.03p a % to 2.9p a %.

But the company is also lowering volume bonuses from 0.3p/litre to just 0.1p/litre for each 1000 litres collected, and halving the group bonus. Hygiene payments remain the same, but MD is doing away with its 0.15p/litre loyalty bonus.

For an MD Foods "standard litre" (4.1% butterfat, 3.25% protein, Bactoscan less than 75,000, cell count below 200,000 and a daily pick-up of 1600 litres), this translates into a fall in milk price from 22.-5p/litre to 21p/litre.

In his letter to suppliers, national farm liaison manager Ian Cameron says: "The market has remained volatile with green £ revaluations and a further one is expected in August."

He also explains that the protein payment cap will be lowered from 3.35% to 3.3%. "The nature of MD Foods business is such that milk protein has little value."

The company will maintain its existing price structure during August and September, before introducing the new schedule.