Dairy Crest to Reduce Non-Aligned Milk Price by 2ppl

UK - Dairy Crest has announced that it has had no alternative but to reduce the milk price it pays to around 575 of its farmers who don't supply either its retailer milk pools or its Davidstow contract, by 2ppl from 1 May 2012.
calendar icon 27 April 2012
clock icon 3 minute read

This reduction partially reverses the additional 3.95ppl Dairy Crest paid these farmers during 2011.

Dairy Crest has confirmed it will maintain the leading price paid to the farmers who supply its Davidstow creamery - home of the leading Cheddar brand Cathedral City.

Mike Sheldon, Group Milk Procurement Director for Dairy Crest stressed that Dairy Crest remains totally committed to its 1,300 dairy farmers. He also explained the importance of the £75 million investment programme within the Dairies business, which had facilitated the consultation on the two site closures.

According to the press statement released by Dairy Crest, the Company is taking a series of steps to secure the future of its Dairies business in a very challenging market. On top of downward pressure on its selling prices in a tough consumer environment and an extremely competitive middle-ground, the whole dairy sector is also suffering from steeply falling commodity markets. Earlier this month the company began consultation with nearly 500 employees on the closure of two dairies, at Aintree and Fenstanton.

In addition, it is seeking selling price increases from its customers wherever possible.

National Farmers Union (NFU) dairy board chairman Mansel Raymond said Dairy Crest’s decision to slash the price paid to its producers by two pence per litre (ppl) with a mere four days’ notice was outrageous.

“How can any farmer run a business faced with cuts of this degree and immediacy? It is clear from its recent trading statement that Dairy Crest finds itself in a challenging position in the market place, a position where it seems unable to get a fair market value for fresh milk from its customers. But this is no excuse for paying a farm gate milk price which is three to four pence per litre below the costs of production,” he added.

“This only reinforces the need for balanced and fair milk contracts. Farmers supplying Dairy Crest liquid contracts are now forced to accept a price cut they have not agreed to, for at least the 12-month notice on their contract.

“This is sheer exploitation and the clearest demonstration yet that those dairy contracts, where buyers have the discretion to change price without mutual consent, must have break clauses which allow farmers to leave earlier.”

NFU President Peter Kendall also condemned the decision and said he would be calling on Farming Minister Jim Paice to take action over unfair milk contracts.

He said: “The exploitative position farmers find themselves in will continue to be used against them by milk buyers unless we see either a robust code of practice or legislation put into operation very soon.

“I will be calling on Jim Paice to ensure the days when milk processors can treat farmers in this way are put behind us. The basic component of a contract is certainty. With a 2ppl price cut at four days’ notice, Dairy Crest has demonstrated that its contract with farmers is fundamentally a bad one.”

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