The current method which sets the milk price paid to Muller Direct suppliers is 'fundamentally flawed', according to producers.
Muller's Milk Group Board (MMG), which represents the dairy processor's suppliers, criticised the Muller Direct pricing mechanism.
On the 12-month anniversary of the 25.25ppl Müller Direct (not aligned to a retailer), MMG said the standard litre liquid base price was 'not one to be celebrated'.
A spokesman for Muller responded by saying it was 'surprised' by the Board’s criticism of the firm's decision to 'maintain a stable milk price during the Covid-19 crisis'.
But MMG stated that non-aligned suppliers for the dairy company were currently receiving a base price 5.92ppl lower than 31.17ppl.
It said this was the average of the two main retailer cost tracker milk prices for September 2020.
In addition, a Muller Direct premium of 1ppl would be paid to suppliers on eligible volume in January 2021, MMG said.
Ray Gibbins, vice-chairman of MMG said: “At this milk price, farmers are having difficulty covering their monthly costs with many relying on the recent government bounce back loans to support their cash flow needs.
"There are fears that dairy farms will increasingly exit production unless the liquid market returns a more sustainable milk price”.
Mr Gibbins said the processor was determining monthly milk prices through 'discretionary prices': "This approach creates an imbalance in the relationship between farmers and processors."
The issue of discretionary pricing is currently being looked at by government as part of a consultation on contractual relationships in the UK dairy industry.
MMG is advocating a review of discretionary pricing and consideration of alternative pricing options, a mechanism to support volume management and the possible adoption of non-exclusivity arrangements.
A spokesman for Muller said its farmer suppliers had 'benefited from stability' throughout the coronavirus pandemic.
“Many of our farmers are opting to manage volatility by fixing the price they receive for a portion of their milk supply, and accessing additional premiums for committing to initiatives such as those which improve animal health.”
“We have a waiting list of farmers who wish to join us, and we will continue to act as a responsible, progressive and reliable milk buyer for those who choose to supply us, including compliance with the Voluntary Code.”
