UK dairy processor Müller has hinted at introducing a fixed price element to its existing milk contract after signing a three-year milk supply deal with retailer Lidl.
The fixed price option was alluded to by managing director of Müller Milk & Ingredients’ Andrew McInnes in a statement following the Lidl deal.
Mr McInnes said: “Locking a portion of [producers’] milk supply at a fixed price will significantly lower exposure to milk price volatility and we are confident that this move will be welcomed.”
Farmers Weekly understands that the deal could allow Müller’s 650 Muller Direct suppliers to lock in a proportion of milk at 28p/litre for a three-year period.
At present, UK processor Lactalis offers its 140 producers a 12-month fixed deal at 27.5p/litre, while Irish processor Glanbia has a five-year fixed price offering for its producers worth around 28p/litre.
NFU national dairy board chairman Michael Oakes said that the deal looks like a substantial announcement by Lidl and Müller.
“It’s the first time a milk buyer and retailer have brought in a long-term fixed price option,” he said.
“However, we need to see more detail to be able to comment further as to what this actually means as so far there is no data on the actual fixed price or fixed term.
“The NFU has been urging milk buyers and their customers to look at ways of helping farmers manage milk price volatility, as not many farmers want to ride the extreme rollercoaster that we have been on in recent years.”
Mr Oakes said that more price stability is good for farmers, milk buyers and, ultimately, consumers.
“We will be meeting with Lidl and Müller in the near future to discuss this new partnership and what it means for suppliers going forward.”
Lidl also announced a three-year deal with Scottish processor Graham’s Family Dairy, which will supply all of the retailer’s Scottish stores with fresh milk and cream until 2021.
However, Graham’s said it is not in a position to give out information as to whether its deal with Lidl involved a fix priced element.