Muller Wiseman has cut its formula price by 1.62p/litre for the first quarter of 2014.
Farmers who choose to have a proportion of their milk priced by the commodity tracker will be paid 33p/litre from 1 April, down from 34.62p/litre in the first three months of the year.
The price change reflects recent falls in the actual milk price equivalent (AMPE) and milk for cheese value equivalent (MCVE), as well as a tweak to the basket of competitor prices tracked by the formula.
See also: Dairy Crest/DCD raise milk price formula 2.486p/litre for April
This drop moves Muller Wiseman’s formula towards Dairy Crest’s equivalent contract, which was boosted by more than 2p to re-launch at 32.75p/litre from April.
Muller Wiseman supply chain planning director Martin Armstrong said the formula price had performed well in 2013 in a strengthening market for global dairy commodities.
“By its nature this contract is likely to be more volatile than the company’s standard litre price – currently 32.50p/litre plus 1p recruitment and expansion bonus – with higher peaks and lower troughs,” he said.
“By its nature this contract is likely to be more volatile than the company’s standard litre price – currently 32.50p/litre plus 1p recruitment and expansion bonus – with higher peaks and lower troughs.”
Martin Armstrong, Muller Wiseman supply chain planning director
“But farmers who opted to sell a proportion of their milk to us in this way over the past year have enjoyed strong returns.”
Farmers supplying Muller Wiseman can choose to have a minimum of 10% of their production priced by the formula, committing them for 12 months.
The price is adjusted each quarter and AMPE accounts for 50% of the change, MCVE accounts for 25% and the competitor basket counts for another 25%.
Muller Wiseman changed the basket’s makeup for the new milk year to reflect changes in the processing industry.
It uses an average of Arla’s direct and Dairy Crest’s liquid prices, and a cheese basket of Dairy Crest’s Davidstow, First Milk’s cheese and Lactalis McLelland’s prices.