Dairy Crest’s liquid milk supply group, Dairy Crest Direct, has issued a £35m ‘profits warning’ following the 1.65p per litre milk price cut announced by the processor this morning.
The cut, which will apply from 1 August, means those DCD farmers not aligned to a specific retailer will receive 24.92ppl, which DCD claimed would lead to a loss of 4.41ppl on every litre supplied.
The DCD Board said it understood that Dairy Crest could not, on its own, correct the current absence of sustainability in the milk supply chain. But unless sustainability was addressed across the liquid sector, the decline in British milk production would accelerate, warned DCD chairman David Herdman.
“Unless some economic reality can return to margins in the liquid market place, then the prospects for future milk production from farms exposed to this sector must be called into significant doubt,” he said.
DCD calculated that an average DCD farmer who supplies 1.2m of milk litres a year, on a standard contract, would see an annual deficit of £53,000 per farm. Multiplied by the 650 farmers on standard contracts, that would lead to a £35m group-wide loss.
DCD would continue to work with Dairy Crest to develop new initiatives and strategies to support milk prices, the group said. But it warned: “Unless the present price situation is reversed with some immediacy, this work will be meaningless for an increasing number of our members, who will be faced with no alternative but to exit milk supply.”
The milk price cut follows a 1.7ppl cut announced by Robert Wiseman Dairies on Friday.