After holding prices steady throughout September and October, milk processors Dairy Crest have announced that suppliers on the Davidstow contract will suffer a 1.5 pence per litre price cut in November.

However, for the rest of Dairy Crest’s suppliers, prices will remain unchanged. Dairy Crest confirmed on Thursday (1st October) that it will hold the November milk price for its farmers on standard Liquid contracts steady.

The average price paid to Dairy Crest’s non-aligned Liquid farmers is currently 23.5 ppl. This is a weighted average of Dairy Crest’s standard Liquid milk price, 21.69 ppl, and Dairy Crest’s Formula contract, which for October is calculated at 27.27 ppl.

Davidstow Milk Price

On Thursday, Dairy Crest announced that, following 8 months of price stability, including an increase in August, it is cutting its Davidstow milk price “to reflect market conditions”. The price cut will bring the Davidstow milk price down to 24.92 ppl, though Dairy Crest said the price paid will still be amongst the highest milk prices paid for a manufacturing contract.

Dairy Crest manager Mike Sheldon commented, “Dairy Crest is proud of the world-class supply chain for our Davidstow cheese creamery. The Davidstow farmers are a vital part in this supply chain.  Our Davidstow milk contract has consistently delivered a premium to supplying farmers. Although I know farmers will be disappointed with this reduction, we remain confident that the contract is extremely competitive and has delivered a prolonged period of stability this year. The £65 million we are investing in the factory to produce infant formula ingredients will also bring extra security to these farmers.”

Dairy Crest has also committed to pass on all monies received from contracts with supermarkets Morrisons and Lidl to farmers. The money will be distributed through a farmer support payment, supplementary to the price paid for raw milk and based on the volume of processed milk purchased by each retailer.

The first supplement is expected to be paid during October , and based on current forecasts, is estimated at around 0.39 ppl. The November supplement is estimated at 0.65 ppl.   

On Wednesday, the Competition and Markets Authority (CMA) green lighted the sale of Dairy Crest’s dairy operations to Müller, subject to certain conditions. If the sale goes ahead as planned (Dairy Crest anticipates that the takeover will be completed by the end of the year) the UK market will be dominated by just three major players - Müller Wiseman, Danish cooperative Arla and Scottish cooperative First Milk.

CMA is still inviting third parties within the industry to comment on the suitability of the takeover.

Commenting on the announcement, Mark Allen, Chief Executive of Dairy Crest, said, “We welcome today’s announcement from the CMA.  The transformational sale of our Dairies operations is another step closer and remains on track to complete in 2015.”