Müller Wiseman has become the second major dairy processor to cut its farmgate milk price in less than a week, announcing a 1.6 pence per litre reduction to 32ppl from 1 June.
The processor said the cut reflected record milk production and weaker global dairy commodities markets, particularly for cream and butter. However, it stressed the long-term outlook for British dairy remained positive and said its milk prices had risen by 36% – from 24.73ppl to their current level of 33.60ppl – since August 2012.
“Across Europe, farmgate milk prices are reducing to reflect market changes. Whilst any correction in the farm-gate price is disappointing, the market is simply responding to higher levels of supply and a weakness in demand for dairy commodities,” said Martin Armstrong, head of group milk supply.
“Whilst UK farmgate milk prices are not immune to volatility and will be subject to increases and decreases over time, we believe that future prospects for British dairying are strong.”
Müller Wiseman’s price cut comes after rival Arla announced a price cut on Friday, reducing its price to UK farmers by 1.27ppl to 33.74ppl.
Arla under fire
Arla’s price cut came into effect this Monday (28 April) – just three days after the announcement. The short notice given to farmers by the co-operative has reignited the debate about the dairy industry’s voluntary code of conduct on contracts, which is designed to give farmers greater equity and security in their dealings with dairy processors.
Signatories to the code commit to giving farmers at least 30 days’ notice before making changes to milk prices, but there is an exemption for farmer-owned co-operatives – such as Arla – which means they can give less notice on price changes.
“Unlike the situation facing our colleagues elsewhere in the industry, this agreement means no immediate price cut for May”
Roddy Catto
Müller Wiseman said Arla’s three-day notice was “an example of inconsistency in how the voluntary code principles apply across the industry”. The chairman of its milk group board, Roddy Catto, added: “Unlike the situation facing our colleagues elsewhere in the industry, this agreement means no immediate price cut for May.”
Arla’s short notice period has also been criticised by Dairy Crest, whose CEO – Mark Allen – issued a statement on Friday saying “this latest price reduction shows the voluntary code of practice is not working fairly for the British dairy sector – for farmers or processors”.
Allen added: “This is especially concerning following a period of aggressive recruitment. Farmers have been put under significant pressure to move just before the price reduction was announced. This is yet another example of the current voluntary code not providing a level playing field. It is essential that the voluntary code review addresses this disparity and prevents a repeat of this situation happening in the future.”
Arla declined to comment.
The voluntary code is currently being reviewed by an independent committee headed by Scottish MP Alex Fergusson; the results are expected by August.
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