Muller, the main milk buyer in the north and north-east, has slashed the price it will pay to farmers from January by 1.5p per litre.
The 5% price drop, from 30.5ppl to 29ppl, will affect non-aligned producers and means Muller suppliers in the area will suffer a double whammy as they are having to pay a 1.75p per litre haulage surcharge to get their milk to the central belt following the closure of the Aberdeen processing plant.
Muller argued that the cut was due to a 25% decline in the UK value of commodity cream and butter since September, and the company’s agriculture director, Rob Hutchinson, stated that the company’s portfolio of added-value dairy products was shielding farmers from the full volatility of global dairy commodity markets.
However the announcement, at the very outset of a winter of soaring feed and bedding bills, unleashed the fury of the farmers’ union.
NFU Scotland vice-president Gary Mitchell criticised the company’s knee-jerk reaction to softening commodity prices and said Muller had jumped at the opportunity to slash the price it pays to producers to shore up its own profits.
“Yet, when cream prices surged, it took Muller many months to return an extra 1.5p per litre to their suppliers,” he said.
“Despite watching all dairy farmers in 2016 endure the lowest milk prices for a generation, Muller and others were slow to lift prices when the markets rose, arguing that their cautious approach was to avoid over production. Now, Muller has dropped the price like a stone at the first opportunity.”
Mr Mitchell added that Scottish dairy farmers still had not recovered from the dairy crisis in 2016. He added: “Muller’s actions simply underlines the very poor treatment of primary producers meted out by other parts of the supply chain in recent times.”
The union’s milk policy manager, George Jamieson, warned that Muller would not be alone in cutting prices.
“The problem is not just volatility and asymmetric pricing, but poor value transfer down the chain by retailers and processors. The good times for dairy farmers are neither long enough nor good enough to compensate for bad times,” he said.
“NFUS is fully aware that we can’t buck the market. Global supply and demand is out with our control and drives UK prices, but farm gate milk price should not be the safety valve for processors and end users to sustain their margins.
“Given the way that Muller suppliers and its producer board have been ignored, there is an urgent need for them to consider the benefits of a properly constituted, professional dairy producer organisation.”