Wyke Farm suppliers are being offered the option to fix between 10% and 50% of their milk output at a fixed standard litre price of 28p/litre for the next three years.
The fixed price deal comes as a result of the Somerset cheesemaker’s long-term contract with the discount supermarket Lidl and is intended to smooth out some of the volatility in farmgate prices.
It is thought to be the first time a contract of this type linked to cheese has been available to UK farmers and follows a similar deal offered by Muller for milk destined for the liquid market.
The scheme will run from 1 January 2020 to 31 Dec 2022, with producers opting to fix between 10% and 50% of their monthly base litres for the whole of the three years.
The price for the fixed volume supplied will be based on a standard litre price of 28p/litre, but will be adjusted according to its butterfat, protein, SSCs and bactoscans.
This milk will not attract the existing volume bonus, but the litres supplied outside of the fixed contract will.
Wyke Farms has earmarked 30m litres for the scheme.
If it is oversubscribed then it may be necessary to scale back the volume of milk that each farmer has requested to fix, although each farmer who request to participate should be offered at least 10%.
Should the scheme be undersubscribed, those who have applied to join may be offered the opportunity of fixing a greater percentage.
Farmers who wish to take part are being asked to return their application forms by 16 December, but there is no obligation for any of the businesses’ 130 farmer suppliers to commit to the scheme.
‘Attitude to risk’
Richard Clothier, managing director of Wyke Farms, told Farmers Weekly a number of producers were already showing interest in signing up.
“It won’t be for everyone’s business, but I think most of our producers have received it well.
“Quite a few have come back interested, but all with different ideas of the amount they want to do.
“Some people are very bold and talking about 50%, and some much less.
“It depends on their individual circumstances, attitude to risk and view of the market.”
Mr Clothier said he’d been keen to develop a scheme that takes some of the volatility out of the market for farmers, particularly at a time when there is uncertainty over future trading arrangements and potential for currency fluctuations.
“Increasingly, we live in a more volatile trading environment and if we can do anything to stabilise that for the producer it has to be a good thing.
“If we can develop more long-term pricing models that allow people to take some of the risk out, I think it will help to attract younger farmers and also support people who are looking to expand their businesses and seeking finance.”