More to be done to make the most of milk contract

Speculation is growing that farm-gate milk prices could reach 30p/litre by the end of the year. But farmers must avoid the temptation to lose focus, says Dairy Crest.

Instead, milk producers should be using this chance to invest in meeting the exact requirements of their contracts, something which not only benefits processors, but alsoleads to financial reward for farmers.

“There’s a lot of scope for individuals to change what they do,” says Stuart Marsden, Dairy Crest’s technical controller of milk purchasing. “Some dairy farmers are benefiting from the extra payments that are tied to fulfilling their contractual requirements, but there are others who are not taking advantage of what processors are offering. The variation that exists between suppliers never ceases to surprise me.

“Suppliers on the same contract can return differences of up to 5p/litre. Part of that is due to volume payment, but there is still variation in composition and hygiene which farmers could work to change.”

Based on a link between cheese yield and butterfat and protein ratios, Dairy Crest has begun to reward farmers a premium over the base price for specific fat and protein content.

For a farmer whose milk contains 3.8% fat and 3.2% protein, they will get up to 1.5p/litre more than one with 4.3% fat and 3.5% protein.

“It’s important to get the balance of fat and protein right for cheese manufacture, so we offer a significant reward for those who get it right,” says Mr Marsden.

Collection volumes, low Bacto­scan and cell counts are also rewarded. “If a dairy farmer has the potential to cut down to every-other-day collections we encourage that.

“While it may be an expense for a farmer to invest in storage facilities, it is cost-effective for us, so we will reward it. If we collect 4000 litres a day, that supplier receives 0.4p/litre, but if it’s 8000 litres every two days, that goes up to 0.8p/litre.”

Above all, says Mr Marsden, a level production profile will help make the most of a contract.

“Like most processors, Dairy Crest has monthly seasonal adjustments in a bid to discourage high spring yields. Farmers should look carefully at supplies and see where there is opportunity to change.”

  • Dairy Event guide – free with this issue

Despite recent milk price rises, getting the most out of milk contracts will be one of the topics for discussion at the Dairy Event on 19-20 September.

Case study

Paul Blewitt – Cornwall

  • Cornish dairy farmer Paul Blewitt supplies 2.6m litres of milk each year to Dairy Crest’s Davidstow creamery.

    He has adjusted his 300-head Holstein herd to meet the processor’s precise contract specification, and is reaping the rewards.

    “I supplemented the feed to raise butterfat, and on the protein side I fed 10% cracked maize, which seemed to help. Getting the fat and protein ratios right has given a big financial reward.”

    Mr Blewitt said it was trial and error to get the best response, but it was worth it changing feeding regime increased yields from 6200 litres a cow to 9000 litres.

    He also moved to year-round calving, picking up a significant bonus for levelling his profile. “It’s hard work to calve all year, but I love doing it. It means I get a level cash-flow and it’s an easier system to manage.”

Don’t rush to bring in big changes

  • Dairy farmers should think carefully before making radical changes to production systems in a bid to better fulfil contracts, says Nick Everington, chief executive of the Royal Association of British Dairy Farmers.

    “People shouldn’t be steamrollered into making changes. Not all dairy farmers can do this because of their production systems. They need to think about how cost-effective these changes would be.”

    Instead, Mr Everington says processors should give farmers more flexibility to take advantage of better prices. “Contracts have to be realistic.

    “Farmers can look at their efficiencies to an extent, but most are very efficient. The way to generate extra profit is through price increases, which some processors have taken into consideration.”