Dairy Crest is to slash its farmgate milk price by a further 1.5ppl from March, but has guaranteed there will be no additional reductions now before July.

The processor announced on Saturday (31 January) farmers on its standard liquid contract would receive 23.09 pence per litre from 1 March, while farmers on Davidstow contracts would receive 25.09ppl – down from 24.59ppl and 26.59 respectively.

The cuts – planned in agreement with farmer representative group Dairy Crest Direct – were the result of continued volatility in the British dairy sector, said Dairy Crest’s MD of dairies, Mike Sheldon.

He claimed Dairy Crest was the first processor in the British dairy sector to introduce a ‘price floor’, and said it would guarantee a lengthy period of stability for farmers and allow them to budget and plan more effectively for the spring flush.

“We want to provide as much stability and certainty for our supplying farmers as we can,” Sheldon said, adding he hoped markets would have recovered by the summer.

“Whilst the continuing high levels of milk production in the UK have resulted in a further price cut in March, this agreement by Dairy Crest and Dairy Crest Direct is crucial as we move through the peak period of milk production,” he said.

Dairy Crest Direct chairman David Herdman added he was under no illusion the latest cut in milk prices could “cause further serious damage to the sustainability of our supply chain.”

But he said the introduction of a price floor until July would “at least provide farmers with some price stability throughout the spring flush, at what we trust is now the bottom of the market.”

Whilst Dairy Crest hoped markets would start to recover this year, it remained “clear that volatility is here to stay,” added Mike Sheldon, and it was critical the British dairy sector had the efficiency and economies of scale to deal with this global volatility going forward..

“That is why we continue to believe that the sale of our dairies business to Müller Wiseman will bring some much-needed stability to the sector.”