Dairy Crest’s formula price will drop by almost 0.5p/litre from October, as the values of all five of the elements contributing to the calculation have fallen since the last review.
The reduction of 0.498p/litre brings the formula price to between 31.234 and 31.424p/litre and the differential between the formula and Dairy Crest’s standard liquid litre to more than 2.7p/litre.
Acknowledging that this is the largest single cut to apply to the formula since its launch in April 2013, Dairy Crest said that cream, retail milk, concentrate feed, fertiliser and red diesel had all fallen in price and warned of further larger cuts to come.
These would be driven largely by cream and feed prices which were falling at faster rates than the other elements in the formula calculation, it said.
If cream and concentrates remain at the lower levels analysts suggest, then the next two months’ formula price moves for November and December would be in the region of -0.9p/litre and -1p/litre each month, with a potentially smaller reduction of about 0.7p/litre for January before levelling off if markets stabilised.
Producers who want to move to the formula contract for October can apply to do so from 22 September by email only. Formula volumes are limited and will be allocated on a “first come, first served” basis for the period from October 2014.