The main milk buyer in the north and north-east is changing the terms and conditions of its contracts.
Muller, which caused controversy last year when it shut the only milk processing plant in the region, has issued new contract terms to its 1,900 UK farmer suppliers.
Farmers have until April 21 to sign the new contracts, which come into force on May 1.
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.
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 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”.
The company’s chief executive, Ronald Kers, said Muller’s farmer suppliers would benefit from a potential £700million dairy revolution in the UK.
He said investment of more than £100million would help the company create a new generation of added value dairy products made with milk from British farmers.
“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,” said Mr Kers.
“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.”
Muller also confirmed it is on the hunt for nominations for 21 member-elected representatives to sit on its Muller Milk Group Farmer Forum.
The company said those elected would have the right to determine issues such as farmer subscription and whether or not farmers should explore forming a dairy producer organisation. Forum members will also elect a Muller Milk Group Board, which will meet with the company on a monthly basis.
