Dairy farmers need to consider the best options for their business on milk pricing as buyers look to become more innovative to reduce volatility.
Muller recently launched its Muller Direct Futures Contract, allowing producers to lock in a monthly milk price for up to 25 per cent of their milk for 12 months.
When announcing a 1ppl increase for October taking its standard litre price to 30ppl, Muller said there had been a ‘very healthy interest’ in its new option.
In Ireland, Glanbia has offered a five year fixed milk price at 31 cents per litre (28ppl).
Dairy analyst Chris Walkland said it was interesting to see processors offering more choice following a ’take it or leave it’ approach through the dairy downturn.
“We are now having a lot more innovation in milk prices. Yew Tree has been offering this for a while and they are of interest to farmers,” he said.
“The ball is rolling and we are not going to stop it, it is an essential development for the industry.”
He advised farmers considering locking in some of their price to weigh up costs and see if the price offered would deliver for them.
While the new contracts might not be suitable for all farms, Mr Walkland said it was certainly an attractive option.
“If you offered 28ppl last year, people would have been snatching your hand off for it. It is 3ppl over the medium term average,” he said.
Glanbia Ireland has also offered an optional feed component for participating farmers with a €30 per tonne (£27.40/t) loyalty payment on feed and a ‘feed adjustor’ of 2 to 3cpl (1.83/2.75p/l).
It said the ‘closed loop’ meant it could offer an ‘exceptionally high level of assurance’ to customers.
NFU dairy board chairman Michael Oakes that was the big benefit, with Yew Tree also advising farmers to lock in on feed costs.
“You can leave yourself with a margin," said Mr Oakes.
"It takes away a lot of unpredictability and you know exactly where you are going to be.”
He added it would be interesting to see if Glanbia in the UK followed Ireland and offered similar options for farmers over the border.