Dairy Crest is to slash the price paid to nearly 600 farmer suppliers by 2p/litre from next month in a bid to secure the future of its dairies business.
The cut, effective from 1 May, affects 575 farmers who don’t supply either its retailer milk pools or its Davidstow cheese contract and takes the standard litre price for those non-aligned producers to 26.61p/litre.
The move followed plans announced earlier this month to close two dairies at Aintree and Fenstanton and was blamed on downward pressure on selling prices, extreme competition in the “middle ground” and falling commodity prices, particularly cream.
Group milk procurement director Mike Sheldon insisted that Dairy Crest remained “totally committed” to its 1300 dairy farmers and the decision to cut farmgate prices had been delayed as long as possible.
“We know that milk production costs remain high and that this will be a blow to those of our farmers who are affected. However, the market pressures on our dairies business mean that we have no alternative.
“We certainly haven’t taken this decision lightly and have looked at all other options. We have undertaken a thorough review of our selling prices and our customer base and we have also cut our own costs. The tough decision to consult on closing two of our dairies and reductions in depot and head office jobs demonstrate this.”
The £75m investment programme within the dairies business highlighted the company’s desire to build a strong business in the future, and this was being done without asking farmers to contribute through capital deductions, he added.