Milk price to drop 2ppl?

Friday, 13 March, 1998

By Robert Harris

THE price paid to farmers for milk could fall by as much as 2ppl, following Milk Marques January selling-round.

Bids were eventually received for 91% of the milk on offer from April onwards — but only after four attempts at selling and a hefty price reduction. Most of the bids were for the cheaper “residual” and “fluctuating” bands, which are worth between 19 and 21.2p/litre. The remaining 9% of total supplies will be sold for contract processing or on the open market and neither promise top returns.

As a result, the price for a standard litre of milk will fall from 20p/litre now to 18-18.5p/litre from Apr 1, less collection charges, said Milk Marque chief executive David Yeomans.

Hugh Richards, outgoing chairman of the NFU milk committee, described the situation as “dreadful”. Farmers with 100 cows now stand to lose up to £10,000 each, he added.

“Prices are now back to those last encountered in the early 1980s,” Mr Richards said. “At least then we had decent calf and cull cow prices. This news is going to put a lot of people under severe pressure. Its getting harder to cut costs. Our only hope is that sterling collapses.”

Milk Marque would be better to sell milk more frequently, or make contracts market-related so they could track price trends, said Dairy Industry Federation director general, John Price.

“The current system is driving buyers out of the market. Milk Marque is fixing the price in February and asking buyers if they want to purchase from April onwards. The system is failing everybody, especially dairy companies. It is not transparent or competitive enough.”

Whether other dairy companies will reduce the price they pay to farmers remains to be seen. Brian Pocock of Unigate said: “The situation remains unchanged for now. Its too early to say — a lot depends on the final outcome, our competitors, and what we can afford to do.”

Nestles John Bavistock said all companies will be considering their positions carefully. “The implication is that the selling round puts a floor in the market. We are very aware of the problems dairy farmers are facing. But the dairy product market is very weak, and very competitive.”

Milk Marque is changing its seasonality adjustments to bring them in line with lower milk prices and ease cash flow. The April deduction will now be 1.5ppl (as opposed to 2p). May will be 2.2p, down from 3p, and June 1.1p compared with 1.5p previously. July, August and September premiums are all lower to balance the books, at 2.6p, 2.2p and 0.4p respectively.