Final Direct Milk price rise as formula contracts wind up

Direct Milk DPO has raised its formula milk price by 1.298p/litre to 31.188p/litre for January.

Producers who supply the core formula and signed up from April 2014 will receive a 0.19p/litre premium, taking their price to 31.378p/litre.

Including the January 2017 increase, the DPO’s formula price will have risen 6.807p/litre (27.91%) since the height of the dairy crisis in July.

The price rise, the sixth of its kind since the summer, will also be the last for Direct Milk DPO’s 200 producers on formula contracts, as the notice served by Muller comes into effect on 31 January 2017.

The final rise was driven by four out of five of the contract’s parameters increasing, with the price of cream up 3.1% to £1,990/t, fertiliser up 5.5% to £188.50/t, feed increasing 2.3% to £225.50/t and fertiliser up 7.7%to 52.29p/litre.

Four pints of milk at retail held at an average of 102p.

See also: Muller faces vocal opposition to new milk contracts

From February, those on formula or partial formula contracts can either opt to take up ex-Dairy Crest Direct non-aligned terms and conditions or they can adopt Muller’s new standard non-aligned contract.

The Direct Milk Formula contract was first introduced in the summer of 2012 as a fair and transparent mechanism to help producers cope with the milk price crisis that was enveloping the industry.

Over the 46-month lifespan of these contracts (April 2013 to January 2017), it paid an average of 29.03p/litre, 9.3% higher than Muller’s standard non-aligned contract’s average over the same period.

Futures contracts: farmer views wanted

Do you use futures and options markets to help you manage risk? Or are you interested to learn more? Farmers Weekly is keen to find out the extent to which UK farmers use these markets. Complete our survey here.

Take the survey

Futures markets and commodity risk management online course:

  • Risk management strategies for a more predictable financial performance
  • Educated conversations when collaborating with your advisors
  • Negotiate better prices with your grain merchants

View course