Farming unions have welcomed the decision of farmer-owned business First Milk to hold its milk price to producers in January.
First Milk has held its milk price for January despite downward pressure in market which has seen others reduce their price.
That contrasts with the decision of dairy giant Muller, which has slashed its milk price to its farmers by a hefty 1.5p per litre, sparking fury in its producers.
Meadow Foods will also be decreasing its 'A' milk price by 1.25 pence per litre to 29.75ppl from January 2018.
However, First Milk suppliers have lived with lower prices for some time. Now the co-op has closed the gap on other milk buyers and is holding its price at a critical time.
In the past few days, the NFU and other farming unions have met with both First Milk and Muller to discuss milk prices and the dairy sector.
At both meetings, frank and constructive discussions were said to have taken place about how the dairy sector must deliver a sustainable future for farmers.
'Anger'
In a joint meeting with NFU England and Wales and NFU Scotland, Milk Policy Manager George Jamieson met with Muller on Monday (11 December).
Speaking after the meeting, he said: “The disappointment and anger felt after the Muller milk price announcement was matched by the frustration and fury vented in the many calls NFU Scotland received from Muller suppliers about the decision.
“Public statements made by Muller’s elected farmer representatives echo the considerable discord that Muller’s shock price move has caused.
“To be clear, we fully recognise that all processors, including Muller, are not immune to the softening world market for dairy produce.
“However, when a major dairy processor that prides itself on being ahead of competitors in investment, branding, adding value and producer representation cuts with such speed and such depth then its producers are entitled to a proper explanation.”
Commodity price surge
The cuts come at a time when the recent surge in dairy commodity prices to record levels fell considerably short of translating into record prices to farmers for their milk.
Dairy farm bank accounts have not recovered from 2015 and 2016, when prices were at their lowest for a generation. The NFU said that the onus is on processors, including Muller, and their customers to pass more value back to farmers.
Mr Jamieson added: “The reality is that, even the most efficient dairy farmers are not receiving enough out of the chain to fund any reasonable level of investment. This is not a market problem but a supply chain imbalance that is unreasonable and inefficient.
“Muller shared with us its growth plans, investment commitments, and aims to add value to ensure its direct suppliers would receive a price that could return a fairer margin. However, it defended the scale of its current price cut on the grounds of softening markets and market competition – something which NFUS does not accept.
“Its milk price announcement undermined some of the ground Muller had made in putting its new producer representation structure in place. That needs to be rebuilt.
Producer Organisation
The NFU has urged Muller and its farmers to further develop its producer representation. It says a Producer Organisation or similar is achievable, and Muller and their farmers have the opportunity to lead supply chain collaboration.
At the First Milk meeting on Tuesday, NFU Scotland President Andrew McCornick met with Chief Executive, Shelagh Hancock and Vice Chairman Jim Baird.
Mr McCornick said: “First Milk and its farmer owners have been through very difficult times following the very hard ‘recovery plan’, but its new team are beginning to achieve the key outcomes its members need - a competitive price and a stable, financially secure First Milk.
“There is no complacency from First Milk and it has pragmatic, but ambitious plans for growth and efficiency, focussing on running a successful business with the goal of returning value to members.”
