A dairy farmer supplying Meadow Foods said the introduction of a revised A/B pricing formula from April 1 could put them out of business.
The new formula will see producers paid the A price of about 19ppl on 80 per cent of their allocation, with the remaining 20 per cent paid on a B price the company claimed ’more accurately reflects the market conditions’.
Informed of the change on December 31, 2015, the dairy farmer, who asked not to be named, said he feared for the future of his farm business.
He said: "We will not be here this time next year unless the market rises. This new formula could put us out of business because of the scale of the B payment which can range from 12.5-17ppl."
Meadow Foods, which recently unveiled profits of £13.7 million on a turnover of £376m for the 12 months to the end of last March, said it had run an A/B formula since April last year and this change was linked to the annual review of the scheme.
It said: "Structuring the milk price in this way will help Meadow Foods pay a better price for the A element, although the exact price can’t be determined this far in advance [of its April 2016 implementation date].
"We realise the pressure low milk prices put on our producers and we will continue to make every effort to move prices back upwards as soon as possible. However, the price Meadow Foods pays for its milk reflects the challenging market conditions."
But the NFU also weighed in to the debate.
NFU dairy board chairman Rob Harrison said: “It’s morally wrong that a dairy posting pre-tax profits of £13.7million in a difficult market situation continues to pay an unsustainable price for milk and takes no consideration of the voluntary code of conduct on contracts and has no formal producer representation."