With volatility ever-present in the dairy industry, Muller brought together key industry figures at its ‘Thriving Through Volatility’ event to discuss what measures they can put in place to create a fairer supply chain.
Farmer need to be offered more options to better insulate themselves against the risks of volatility, but more education was needed to help them make the correct decisions for their businesses.
Muller’s ’Thriving Through Volatility’ event brought together key figures from the dairy industry, including farmers, union representatives, consultants and a representative from Defra to discuss how to insulate farmers from volatility.
Muller Milk Group chairman David Herdman said it had been their drive to give farmers options.
He said: “We have managed this in the futures and fixed prices.”
He said it always seemed the risk was shouldered by farmers but he wanted the supply chain to work together.
“I think the [three-year partnership] deal with Lidl spreads this risk more,” he added.
Charlie Highland, FC Stone head of EU dairy, said futures markets, such as the one Muller launched earlier in the year, were just beginning in the UK.
“The deals we have are not perfect but they are getting there,” he said.
He added managing risk through the supply chain was difficult, with farmers wanting to hedge when prices were high, but customers were keen to do so when prices were low.
Futures markets in grain also started ‘extremely slow’ but now were a major part of the arable sector.
“There are a lot of educational challenges. It takes time to get through the supply chain,” said Mr Highland.
Getting the right information available was also key, including creating a benchmark for cheese, and some in the room suggested mandatory price reporting could help create better benchmarks, as was done in US futures markets.
While Muller’s futures option was welcome, the panel suggested it had initially been inflexible and confusing for farmers.
Rob Hutchison, Muller milk supply director, admitted they needed to simplify the system and make it more flexible to help farmers better use it.
“We have started it and want to develop it,” he said.
He said they had just released another set of volume and have now got a rolling volume.
“You can lock in at what point you want in the cycle.”
Mr Hutchison said the Lidl fixed price contract had recieved a lot of good responses.
“The majority of farmers have taken up the three year option.”
Michael Oakes, NFU dairy board chairman, added most farmers would only be able to access options through their milk buyer and Muller was leading the way, but there was still distrust.
“There are farmers who think you are trying to pull a fast one. What you are trying to do is give them a tool.”