Milk price disputes emerge at Muller and Saputo

Disputes between dairy farmers and their milk buyers have emerged at two more companies as producers express their frustration at low prices across much of the industry.

Suppliers of Muller and Saputo have this week followed Medina and Freshways in going public with their disappointment.

Dairy farmers supplying Muller have said they will strongly advocate for a change to how milk is priced in the ongoing Defra dairy contract reform consultation.

See also: Analysis: What could reform of milk contract law achieve?

Producers from the Muller Milk Group (MMG), which represents the 1,550 farms that supply the UK’s largest liquid milk buyer, said the current discretionary pricing mechanism is “fundamentally flawed”.

The group also warned that the non-aligned price of 25.25p/litre, received by about 650 of the group’s members, was too far below what aligned producers are earning.

It is currently 5.92p/litre below the average of the two main retailer cost tracker milk prices for September 2020, which stands at 31.17p/litre.

Ray Gibbins, vice-chairman of the MMG board said: “At this milk price, many Müller Direct farmers are having difficulty covering their monthly costs, with many relying on the recent government bounce-back loans to support their cashflow needs.

“There are fears that dairy farms will increasingly exit production unless the liquid market returns a more sustainable milk price”.

The board said it will be strongly advocating for a review of discretionary pricing and consideration of alternative pricing options, a mechanism to support volume management and the possible adoption of non-exclusivity arrangements.

Muller waiting list

A spokesman for Muller brushed off the attack, noting that the firm currently has a waiting list of dairy farmers wishing to join it.

“We are surprised by the MMG board’s criticism of our decision to maintain a stable milk price during the Covid-19 crisis,” he said.

“By comparison, many dairy farmers in Britain have suffered severe hardship, including significant reductions in their income and the distressing practice of pouring unwanted milk down drains.

“Muller farmers have benefited from stability through this period of volatility, which has protected those who choose to supply our business from the problems seen elsewhere.”

Muller also offers farmers the option to manage volatility by fixing the price on a portion of their supply, he said, and additional premiums for committing to initiatives that improve animal health.

The Muller Direct premium will pay 1p/litre to members on eligible litres produced in 2020 in arrears in January 2021.

Saputo frustration 

Elsewhere, farmers in the South West supplying the Cathedral City cheese manufacturer Saputo have expressed frustration that they are not sharing in the additional income generated by the brand’s rocketing sales.

Farmers in Dairy Crest Direct (DCD), the UK’s only dairy producer organisation, are in a formal negotiation deadlock, which allows them to currently leave their contracts with Saputo Dairy UK with three months’ notice instead of the usual 12.

This came after the buyer said prices would be flat for September at 28.65p/litre.

DCD chairman Stephen Bone said farmers were disappointed that, given the retailer had cut prices earlier in the year because of concerns about retail cheese sales, prices could not now rise when sales had spectacularly improved.

Revenue from Cathedral City is reportedly up 36% since the coronavirus lockdown, with sales volumes up 27%.

Mr Bone stressed that the situation had not deteriorated to “pistols at dawn” and that DCD and Saputo continue to have a very good working relationship.

September rise for First Milk members

First Milk’s September producer milk price will increase by 0.5p/litre, taking its liquid standard litre to 27.25p/litre, while its manufacturing standard litre will rise to 28.15p/litre, both including the member premium.