Muller announces new contract terms to its 1900 UK farmer suppliers

Muller is the UK’s largest privately owned dairy processor
Muller is the UK’s largest privately owned dairy processor

Dairy giant Muller has issued new contract terms to its 1,900 UK farmer suppliers.

Muller said the new contracts were designed to deliver a competitive milk price over the long-term, with the aim of fostering a closer working relationship between suppliers and the company.

The contracts had been delayed several times due to disagreements among producers over the terms of the proposed deal, with its initial implementation originally planned for January.

New terms include a penalty of 0.025p a litre for every 0.01% for butterfat less than 4% and a bonus of 0.025p a litre for every 0.01% above 4% butterfat.

Muller’s new offering focuses on three core principles: Clear and transparent contract terms; a competitive pricing structure; and a close working relationship that facilitates knowledge sharing and the ability to react to market forces.

Muller also revealed plans to introduce a new Muller Ingredients Contract later this year, which will give farmers an added option to hedge and fix a proportion of their production based on futures markets. It said this would “help achieve greater stability in volatile markets”.

'Enormous untapped potential'

The company’s chief executive, Ronald Kers said: “Dairy has enormous untapped potential in the UK because the category remains heavily dependent on imported added value dairy products which could be made here, with milk from British farms.

“To realise this opportunity for our farmer suppliers and our customers, we will invest in our operational capabilities but we also need to build a much more intuitive working relationship with Muller Milk Group members based on aligning what we all do more closely.

“The damage to all parts of the supply chain resulting from extreme variances between the supply of raw milk and the requirement for that milk is all too obvious in the recent balance sheets of dairy farmers and processors and we are acting now to create a more sustainable future.”