cow

Müller has droppped its farmgate price by 2.25p since December 

Dairy farmers supplying Müller have warned the processor’s latest milk price cut will push many to the brink, and could threaten the viability of the dairy giant’s supply base.

Müller Milk & Ingredients announced today it would cut the price it paid to members of the Müller Milk Group (on Müller Direct non supermarket-aligned contracts) to 26.25p per litre from 1 March, which is a 1.25p drop on its January price and a 2.25p drop on the price it paid in December.

The processor said the price cut reflected “a surge in milk production from farms”, with AHDB data suggesting off-farm milk production in December was the highest for a quarter of a century.

Müller milk supply director Rob Hutchison claimed supplies from most farms were “well ahead of forecast”, which was affecting the value of their milk.

But MMG chairman David Herdman insisted the reduction delivered “an increasingly unsustainable milk price to our members”, who had faced “unprecedented increases in unavoidable farm costs” such as feed over the past few months.

As profit margins shrink, what’s going wrong in liquid milk?

Issuing a “farm profits warning”, MMG suggested the cuts amounted to a deficit of £71,400 per farm when extrapolated over a year, which when multiplied by the 650 farmers supplying through non supermarket-aligned Müller Direct contracts, represented a total loss of £46.4m a year, 

Müller’s March price was now some 4.76ppl below the average paid by the two main two main retailer-aligned milk supply contracts, MMG claimed.

In response, Müller said the price it paid was “an honest reflection of the market”, and stressed it had maintained a 28ppl price for farmers signing up to its fixed price contract option – which aims to smooth out milk price volatility.

However, the rise in costs, coupled with Müller’s decision to drop the Müller Direct price to 26.25ppl, had left many farmers “in a dire financial position”, said Herdman. There could be negative consequences for future milk supplies, which were already under pressure due to a reduction in cow numbers and the high level of farmers deciding to leave the industry, he warned.

“Unless some economic realities can return margins in the liquid market place, the prospects for future milk production from farms exposed to this sector must be called into significant doubt,” Herdman added.

“It was impossible for the MMG Board to support March’s Müller Direct reduction in milk price. It is time for all in the milk supply chain to come to their senses and rebuild UK dairying into the thriving and innovative industry that it should and can be.”

The announcement was described as a “bitter disappointment”, by NFU Scotland milk chair John Smith, and was a “clear step backwards in the market which creates serious concerns around Muller’s profitability”.