Müller UK & Ireland Group has confirmed that its standard milk price from March 5, 2015 will be 24.15ppl, a reduction of 1.75ppl.

The company took a decision to hold its milk price for February but said it has since faced a widening gap between its price and those offered by other processors, including farmer owned co-operatives, which it claimed "could potentially affect [its] ability to compete."

Earlier in the week, Dairy Crest announced that it was cutting the farmgate milk price by 1.5ppl but would not drop the price further before July.

Although the market for farm-gate milk remains affected by high levels of milk supply from farms and weak demand for dairy products, Müller has reaffirmed its intention to continue paying a leading ‘clean’ price on all litres supplied by farmers.

This means that the price offered by the company will not be further eroded by deductions or penalties of the kind imposed by other purchasers including farmer owned co-operatives, for balancing, haulage, capital contributions or mechanisms which pay full price on only a proportion of the milk which farmers supply.

Müller has also reaffirmed its support for the spirit and intent of the Voluntary Code, meaning that farmers have a full months’ notice of any price change and the flexibility to move elsewhere within three months if they choose to do so.

Carl Ravenhall, Managing Director of Müller Wiseman Dairies said:

“After leaving our milk price unchanged for February, we must now reflect further drops in the value of cream and butter products and the need to be competitive in the supply of dairy products to our customers in our March price.

“We continue to take very difficult and painful decisions within our company to ensure that our costs are as low as they can be, but our business cannot compete if the cost of the milk that we buy from farmers is substantially higher than that of our competitors.

“We very much look forward to seeing an improvement in the market for farm-gate milk which can then be reflected in the milk price which we can offer.”

Roddy Catto, Chairman of the Müller Wiseman Milk Group which represents dairy farmers who supply the company said:

“The speed of decline in the value of milk produced by farmers in Britain is well documented and unprecedented.

“Our discussions with the Müller management team have been robust and focused on ensuring that the company is fully aware of the trading difficulties faced by dairy farmers in these extremely trying times.

“The company has maintained its commitment to pay a leading price to dairy farmers, and we recognise that it must remain competitive in an environment where other processors are paying less for their milk.

“As dairy farmers ourselves we do not welcome a further reduction in milk price but the board has worked effectively with Müller to ensure that the standard litre price offered from March remains one of the best available.

“We look forward with the company to a stabilisation of markets and a reversal in this downward and damaging trend.”

However, the NFU said Muller Wiseman had taken a "Decision to follow other processors down," which the union criticised as “unacceptable."

On Friday, NFU dairy board chair Rob Harrison said Muller should not have attempted to justify the cuts with the claim that it was an attempt to “remain competitive” in the milk market. He added, “There are now some positive signs on the European market and FrieslandCampina increased its February milk price by €1.25 per 100kg milk and stated that ‘the upward price trend of foil cheeses, milk powders and butter’ will stabilise prices across their reference companies, and New Zealand has reduced its milk production forecast.

“To see Muller Wiseman declaring that it is following others with price cuts is a deplorable change in direction. We need to develop trust between processors and farmers to ensure that changes are reflected honestly and with clarity, ensuring that when markets do recover this happens quickly to stop farmers suffering.”
 
Harrison was also critical of Morrisons, which recently announced the result of its milk contract tender. The supermarket, one of the UK’s ‘Big Four’, will be reducing the volume of milk it procures from Dairy Crest by a third.

Commenting on Morrisons’ decision to give only one month’s notice of the change, the NFU spokesperson said, “Such short term notice periods are completely unacceptable in the supply chain. The NFU has worked hard to ensure better terms and conditions between farmers and processors, but these mean nothing if changes can be made in such short timeframes higher up the chain.
 
“Retailers must seriously consider how their decisions impact on British dairy farmers in the short and longer term.”