Muller repeats fixed-price offer to milk producers

Muller and retailer Lidl GB have launched a three-year, fixed-price option for dairy farmer suppliers.

The offer of 29p/litre from 1 July 2021 is open to the milk processor’s 900 Muller Direct group of farmers.

These suppliers will have the option to commit up to 50% of their milk supply to the scheme.

See also: NAAC farm contractor charges 2021-22

The remainder of their production volume will attract the standard Muller Direct milk price based on market values.

Muller Milk & Ingredients chief operating officer Rob Hutchison said the fixed-price option would help farmers by giving them stability and confidence in their future operations.

While the 29p/litre rate compared favourably with Muller’s historical price levels, dairy market specialist Chris Walkland said suppliers would have to consider carefully the likely costs of production.

Current calculations suggest costs of production well in excess of 29p/litre due to high feed and fertiliser prices, he said.

It is impossible to say what costs will do over the three-year term of the contract and some Muller Direct suppliers might be able to drive costs down below this level and make a profit, Mr Walkland said.

All those looking at the fixed contract need to assess very carefully whether they can make it work within their own business cost structures, he advised.

Many specialist farm business consultants put average cost of production for the current milk year at more than 30p/litre, with increased feed prices adding at least 1.2-1.5p/litre on to costs this year compared with last.

AHDB Dairy estimates that the full economic cost of milk production, including replacement heifer rearing, was between 28.2p/litre and 32.1p/litre in 2020 for the middle 50% of herds. 

Aside from the fixed-price contract, Lidl GB and Muller will continue to work together on the retailer’s Grassroots Dairy Partnership.

The initiative provides a network for the next generation of dairy farmers on Lidl’s contract to work more closely with the discounter and other farmers to tackle challenges facing the sector.

Over the next 12 months, the Grassroots Dairy Partnership will support dairy farmers in the programme to help reduce on-farm carbon emissions.

It will also offer young farmers the opportunity to collaborate with those working in other sectors within Lidl’s supply chain as part of an information exchange effort to share best practice.