Suppliers have 30 days from September 30 to hand in 3 months notice on their contracts
Direct Milk DPO members who supply MM&I via a standard liquid contract have a 30 day period from September 30 to serve their three month notice after it announced a ’deadlock’ situation.
It has announced a 1.74ppl rise in November taking the standard litre price to 20.936ppl before any retailer supplements.
Despite ’lengthy negotiations’, the Direct Milk DPO Board said it had to ‘agree to disagree’ with Muller Milk and Ingredients over the final level of price change for November. The board believes farmers should now be being paid at least 25ppl.
"All dairy markets, with the exception of SMP have exceeded the position of 2007 when 7ppl was delivered across a similar period to support the milk price," a spokesman said.
"Of course we completely accept that there will always be some market lag within commercial milk trading arrangements as markets rise and fall.
"But, as UK dairy markets have been improving since May, and the outcomes from this negotiation would not be paid to members until December it is extremely disappointing that an agreement could not be reached.
"Direct Milk members therefore have the same opportunities as our MMG colleagues who already have the ability to resign their contracts with three months’ notice.
"This decision has not been taken lightly, but we consider it absolutely necessary in the current circumstances to provide our members with every opportunity to ensure the choices for their businesses."
A spokesman for Muller said: "Whilst agreement on the level of price increase couldn’t be reached with our Farmer Board on this occasion, we understand each others’ positions and challenges and we will continue to work together to reflect the positive outlook for milk prices.
"Deadlock simply enables farmers who are members of the Direct Milk DPO the opportunity to terminate their milk contract with 3 months’ notice if they wish to do so," they said.
"This is a contractual option which has been available to our longer-standing Muller non-aligned farmers for more than 20 years, during which time we have grown our supply base substantially and succeeded in consistently delivering a competitive milk price and contract.
"The market for farmgate milk is recovering and we are confident that the returns we are offering farmers in November are highly competitive, and that our proposition, backed by substantial investment in adding value to farm gate milk, will deliver for Muller farmers and those who may wish to supply us in the future."
NFU Dairy Board Chairman, Michael Oakes said it is ’about time’ producers saw significant increases.
"Clearly this is the message Direct Milk PO presented to the Muller management in their discussions, where they believe the price should be at least 25ppl,” he said.
"Across the country farmers are still struggling with milk prices well below the cost of production, hence reducing volumes.
"What we now need to see is everyone behaving responsibly and passing back a price that truly reflects the reality of the marketplace they operate in."
Mr Walkland said the current market is 'failing everyone'.
"The deadlock situation as I see it is just yet more evidence that there needs to be a new deal for non-aligned farmers in the UK.
"There needs to be a new deal on numerous fronts to help tame the volatility monster that has ripped into them over the last year or so,” he said.
"The market is not working for non-aligned farmers. But then it is not working for processors either, or their customers. There is too much volatility, too much unpredictability of prices.
"Farmers blame the processors because it is easy for them to do so, but the processors have to get the money from their customers first, and from what I gather these customers kick and scream and procrastinate when prices rise like nobody's business.
"Medium and longer term contracts also affect the speed at which increases get back to farmers – there is no doubt processors sold forward for the fourth quarter at much lower prices than current ones, and that is affecting milk prices rises," he said.
"There needs to be fundamental change across the supply chain in the way that dairy products are bought and sold before the next downturn to ensure the non-aligned are not exposed as much as they were this time around."