First Milk has held off on a milk price cut for now, keeping its cheese manufacturing pool price at 28.9 pence per litre after key retailers agreed to pay more for their cheese.
First Milk’s major cheese customers include The Co-operative Group, Morrisons and Asda. A spokeswoman for Asda said “we’re currently in the final stages of negotiations with First Milk to increase the cost price we pay,” with Morrisons also understood to have agreed to pay more.
A spokesperson for The Co-operative Food said: “In March we increased the amount we pay for milk for cheese production to First Milk, who provide the vast majority of our own-brand cheese.”
The farmer co-operative was thought to be gearing up to cut its cheese price earlier in April, after chairman Bill Mustoe warned of a “crunch point” for the British cheese industry and called on retailers and foodservice operators to pay more for cheese. This was followed by a number of farmer protests and blockades through Farmers for Action at depots belonging to The Co-operative Group and Morrisons.
“We continue to have discussions with all our main cheese customers, where they have demonstrated a good understanding of the current market environment”
In a statement issued today, First Milk announced it was holding its cheese price and added: “We continue to have discussions with all our main cheese customers, where they have demonstrated a good understanding of the current market environment.”
The co-op also said it was increasing its liquid milk price by 1ppl in two phases, with an initial 0.05ppl rise coming in from 1 July followed by a further 0.5ppl, to 30.65ppl, from 1 August.
In addition, First Milk announced plans to take advantage of strong dairy commodities markets by launching a new commodity contract for new milk volume as well as diverting some of its existing volume to the Westbury plant. It declined to quantify how much of its existing volume would go to Westbury.
On its new commodity contract, it said: “The commodity contract is targeted at securing new volume and all profits from putting this new milk through Westbury will be channelled back to enhance the returns for members’ businesses. It is a market-driven contract with a price-tracker mechanism based on quoted Dutch prices.”
First Milk also said it remained “fully committed to paying out two returns on capital per annum” amounting to 6% in total. It already made a 3% payment in April.
Rob Newbery, chief dairy adviser at the NFU, said farmers were relieved First Milk had not cut its price but “disappointed” the co-op had not increased its price either. “It’s disappointing given there’s other milk buyers out there putting their prices up,” he added.
Competition for milk hots up
First Milk’s milk price announcements today come as competition for milk supplies hots up and rival processors up their prices and create new incentives to secure milk volumes.
Earlier this week, Arla announced its liquid milk price would go up by 1.25ppl from 1 June, taking its AFMP (Arla Foods Milk Partnership) price to 31.63ppl (with Arla Milk Link Direct moving to 31.25ppl and Arla Foods Direct to 31.27ppl). It also launched a 5ppl volume incentive for farmers who are not on aligned retailer contracts, which will apply between 1 July and 31 December.
Meanwhile, Müller Wiseman announced a 1ppl increase in its standard liquid milk price to 31.5ppl from 1 June, while Dairy Crest moved its standard liquid milk price by 1.5ppl from 1 June, to 31.5ppl, introduced a new volume incentive and raised its Davidstow cheese milk price by 1ppl from 1 June, to 31.25ppl.