Dairy farmers hit by cut in price paid for milk they supply

The cut of 2p a litre, taking effect on May 1, affects 575 farmers who supply Dairy Crest but are not covered by special contracts which guarantee a market-related minimum price.

About 700 other Dairy Crest suppliers are protected because their milk goes to one of the big-name supermarkets or the factory which makes Dairy Crest’s flagship cheese, Cathedral City.

The 2p-a-litre blow to the vulnerable ones is seen as an indicator of the difficulty Dairy Crest is in.

It recently lost a contract to supply liquid milk to Tesco and opened discussions about closing two processing plants, employing 500 people, at Liverpool and in Cambridgeshire.

The firm is also facing recession-linked factors affecting everybody in the business – a war between retailers to supply the cheapest milk and a dip in the value of internationally-traded by-products like milk powder and cheese.

Farmers have been complaining for a long time at prices which do not cover their costs – or only just do, if they are big producers.

NFU dairy board chairman Mansel Raymond said Dairy Crest’s decision was outrageous.

“How can any farmer run a business faced with cuts of this degree and immediacy?” he added. “It is clear from its recent trading statement that Dairy Crest finds itself in a challenging 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 3-4ppl (pence per litre) below the costs of production.

“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 dairy contracts where buyers have the discretion to change price without mutual consent must have break clauses which allow farmers to leave earlier.”

Dairy Crest said it had been faced with “no alternative” and, Group Milk Procurement Director Mike Sheldon stressed it remained totally committed to its farmers.