National: Dairy Crest milk price cut “outrageous”, says National Farmers’ Union
FARMERS’ leaders have slammed a decision by milk processor Dairy Crest to cut what it pays to dairy farms by two pence a litre with just four days’ notice.
The National Farmers’ Union (NFU) condemned Dairy Crest’s price cut to farmers supplying into its nonaligned liquid contracts.
NFU dairy board chairman Mansel Raymond said Dairy Crest’s decision to slash the price paid to its producers by two pence per litre with just four days’ notice was “outrageous”.
“How can any farmer run a business faced with cuts of this degree and immediacy? It is clear from its recent trading statement that Dairy Crest finds itself in a challenging position in the market place, a position where it seems unable to get a fair market value for fresh milk from its customers. But this is no excuse for paying a farm gate milk price which is three to four pence a litre below the costs of production,” he said.
Dairy Crest, which announced earlier this month its plans to close its dairy plants in Cambridgeshire and in Liverpool, said it had “no alternative” but to reduce the milk price it pays to around 575 of its farmers who don’t supply either its retailer milk pools or its Davidstow contract, by two pence a litre from May 1.
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It added it was taking a series of steps to secure the future of its dairies business in “a very challenging market”.
Mr Raymond said: “This only reinforces the need for balanced and fair milk contracts. Farmers supplying Dairy Crest liquid contracts are now forced to accept a price cut they have not agreed to, for at least the 12-month notice on their contract.
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“This is sheer exploitation and the clearest demonstration yet that those dairy contracts, where buyers have the discretion to change price without mutual consent, must have break clauses which allow farmers to leave earlier.”
NFU President Peter Kendall also condemned the decision and said he would be calling on Farming Minister Jim Paice to take action over “unfair” milk contracts.
He said: “The exploitative position farmers find themselves in will continue to be used against them by milk buyers unless we see either a robust code of practice or legislation put into operation very soon.
“I will be calling on Jim Paice to ensure the days when milk processors can treat farmers in this way are put behind us. The basic component of a contract is certainty. With a two pence a litre price cut at four days’ notice, Dairy Crest has demonstrated that its contract with farmers is fundamentally a bad one.”
In a statement, Dairy Crest said: “On top of downward pressure on its selling prices in a tough consumer environment and an extremely competitive middle-ground, the whole dairy sector is also suffering from steeply falling commodity markets. Earlier this month the company began consultation with nearly 500 employees on the closure of two dairies, at Aintree and Fenstanton (in Cambridgeshire).
“In addition, it is seeking selling price increases from its customers wherever possible.”
The reduction partially reverses the additional 3.95p per litre Dairy Crest paid the 575 farmers during 2011, it said.
Mike Sheldon, Group Milk Procurement Director, stressed that Dairy Crest remained “totally committed” to its 1,300 dairy farmers. He also stressed the importance of a �75million investment programme within the dairies business.