Muller Shocker on Milk Price: 1.5p Price Cut Angers Dairy Farmers

UK - News that dairy giant Muller are to slash the price paid to their farmers by a massive 1.5p per litre has seen NFU Scotland receive many calls from angry Muller suppliers.
calendar icon 5 December 2017
clock icon 3 minute read

The scale of the price drop is hugely disappointing for Muller direct suppliers and, worryingly, opens the door for other milk processors to follow suit.

NFU Scotland has spoken to colleagues in NFU England and Wales and will approach Muller with an urgent request for a joint face-to-face meeting in the next few days.

NFU Scotland Vice President Gary Mitchell said: "Muller has set an appalling precedent and once again farmers are left to pay the price.

"At the first sign of cream and butter prices softening from what are historical highs, Muller has jumped at the opportunity to slash the price it pays to producers to shore up its own profits. Yet, when cream prices surged, it took Muller many months to return an extra 1.5p per litre to their suppliers.

"Despite watching all dairy farmers in 2016 endure the lowest milk prices for a generation, Muller and others were slow to lift prices when the markets rose, arguing that their cautious approach was to avoid over production. Now, Muller has dropped the price like a stone at the first opportunity.

"The reality is that November butter and cream prices of £4500 and £2100 per tonne respectively, while dipping from the highs of the summer, are still thousands of pounds per tonne higher than the trough seen in spring 2016.

"As a company, we believed Muller had made good strides in developing producer representation, futures options and volume projection. However, the decision to slash prices went against the recommendation of the company’s farmer board to hold.

"Many dairy farmers across Scotland, including all Muller producers, face a high cost winter where they are short of forage with soaring feed and bedding bills. For Muller’s farmers in the North East, they face the double whammy of a 1.75p per litre haulage cost to get their milk to the central belt since Muller closed its processing site in Aberdeen.

"No dairy farmer in Scotland will have seen their bank account recover from the dairy crisis in 2016 and Muller’s actions simply underlines the very poor treatment of primary producers meted out by other parts of the supply chain in recent times.

"The average price over the last 5 years has been 27.3p per litre. The top 25 per cent of dairy farmers have a cost of production of 26.5ppl. When the very best can barely cover their costs, actions like that taken by Muller risks more farmers walking away from dairying."

NFU Scotland’s Milk Policy Manager George Jamieson added: "The problems run deeper than this price cut and, sadly, Muller will not be alone. NFUS has cited the lack of genuine collaboration within the dairy supply chain for several years.

"The problem is not just volatility and asymmetric pricing, but poor value transfer down the chain by retailers and processors. The good times for dairy farmers are neither long enough nor good enough to compensate for bad times.

"NFUS is fully aware that we can’t buck the market. Global supply and demand is out with our control and drives UK prices, but farm gate milk price should not be the safety valve for processors and end users to sustain their margins.

"Well over 90 per cent of consumers eat dairy products every day; it is staple part of the diet, and yet processors and retailers are seemingly content for dairy farmers to merely survive, rather than thrive and invest to preserve the hugely important UK dairy farming sector.

"Given the way that Muller suppliers and its producer board have been ignored, there is an urgent need for them to consider the benefits of a properly constituted, professional Dairy Producer Organisation."

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