Soaring fuel prices could herald the introduction of pricing mechanisms for raw milk that reflect true costs, according to a leading consultant.
John Allen of consultancy Kite said that cost-reflective pricing would reward dairy farmers operating close to dairies because it was cheaper to collect their milk. Currently farmers receive a base price plus a volume-determined bonus. Allen said: "A farm situated 200 miles from the market gets the same price as an identically sized producer just one mile away.
"As margins tighten, I think the industry will introduce new efficiency bonuses that look at more than just volume.
"I predict producers being offered a lower base price but securing 3-4ppl extra via efficiency and volume bonuses."