Dairy Crest price cut ‘dubious’

The NFU has criticised the decision by Dairy Crest to reduce the price paid to liquid milk suppliers. The NFU described the justification for the cut as dubious and called for a new approach to pricing in the dairy sector.

NFU dairy board chairman, Gwyn Jones, said: "To its credit, Dairy Crest has promoted positive messages in favour of stability and the need to break the mould in terms of liquid milk pricing in recent times. It is a real shame that this move has seen a lot of that credit lost.

"Justification for this cut is, at best, dubious since a large proportion of the cream Dairy Crest buys from dairy farmers goes into added-value butters and spreads such as Countrylife.

"Once again this move demonstrates some of the weaknesses with the current contractual system which allows returns from by-products such as commodity cream to drive prices in what should be an added-value market. This situation allows price cuts to be made on a whim without an opportunity for farmers to exercise a right to quit. This episode also shows the need for farmers to be sophisticated and professional in their negotiations with their processing customers."

Mr Jones said: "The market is tough, fierce and competitive, but not all segments of the market need to be inextricably linked to the commodity market.

"There is an urgent need for a new approach to pricing in the dairy sector as we have promoted in the NFU Vision for the dairy industry. Some milk buyers have signaled their intention to do this. Others need to follow.

"We need to move towards a more stable, long term approach to milk pricing which gives dairy processors stronger incentives to maximise returns from the market place and which makes it more difficult for them to make up for their marketing weakness by effectively sending the bill to their producers.

"Farmers need to be at the forefront in exerting pressure on their buyers to call for it and buyers need to be at the forefront in asking their customers for better deals."