Muller Dairy at Market Drayton

The recovery in the dairy market looks to be gathering pace, with Müller Milk & Ingredients becoming the latest UK processor to increase payments to dairy farmers.

The company is to increase its standard farmgate milk price by 1p per litre from 1 October in response to a tightening of milk supply and a strengthening in global commodity markets.

It comes after a period of protest outside Müller processing plants across the country by farmers angry at the dairy giant’s decision to hold its September milk price while competitors raised theirs, and on the back of a significant tightening in global supplies which has seen Fonterra’s Global Dairy Trade index rise by almost 13% over the past fortnight.

“We are hopeful that dairy commodities markets have turned a corner and we will now see a sustained recovery,” said Müller’s agriculture director Lyndsay Chapman.

“We are hopeful that dairy commodities markets have turned a corner and we will now see a sustained recovery”

Müller agriculture director Lyndsay Chapman

“Cream and butter values have shown improvements that are now starting to be realised in our business, although the latter is taking longer to recover due to the volumes of butter in storage. Better returns will lead to higher farmgate milk prices, and we are optimistic in this respect.”

The price increase follows warnings by Müller group CEO Ronald Kers earlier this month that the processor could struggle to collect milk from farmers if blockades of its sites by protesting farmers persisted.

“It is important to stress that our standard price is competitive in its own right but with the addition of the retailer supplement, actual realisations for Müller non-aligned farmers are substantially higher than those received by farmers supplying other processors who receive similar supplements but choose not to offer the same level of transparency,” Chapman added.

“It is right that this additional and very welcome supplement is aimed at Müller farmers who aren’t already part of one of our supermarket aligned groups. We wouldn’t be able to achieve this if the supplement was simply absorbed into our standard litre price and, as a result, spread across all Müller suppliers including some aligned producers.”

The increase was welcomed by Müller Milk Group farmer board chairman Roddy Catto, who said farmers now “hope to see a sustained recovery” to the dairy market.

The processor has also started work to equalise the prices it pays to its two farmer groups to ensure that “all non-aligned dairy farmers supplying the business can benefit from the same standard liquid price”, with the milk price harmonisation set to be phased in over the coming months.

Other processors

Müller’s price increase comes as First Milk reacted to improving market conditions by raising its milk price for the third month in a row for September with an increase of up to 1.25ppl.