Direct Milk DPO members will receive their first increase to the standard litre price in almost three years. From October it will increase by 1.189ppl taking the standard litre price to 19.189ppl excluding supplementary payments.
This includes the first stage of price harmonisation (after eight months since the Dairy Crest sale to Muller) between the two supplying groups. On average, Muller is increasing the price by 1p/l.
The new standard litre price for Muller Milk Group (MMG) is 19.560p. It means the price differential has reduced from 0.660p to 0.371p
These prices are before the payment of any retail supplement, which was +2.894p/l for July.
A letter to DM members said: "Direct Milk remains very grateful for the significant collective contribution that Aldi, Lidl and Morrisons has made to milk price returns.
"The payment of +2.894p on July volumes (paid August) again represents a substantial 16 per cent of the monthly milk statement. A similar p/l payment is expected for August supplies (paid September) dependent on raw milk volumes supplied versus retail sales.
"Of course, as dairy markets improve and as standard contract prices rise, so the differentials delivering the retail supplementary payments will understandably reduce."
The letter highlighted the shortfall in EU milk production on a year on year basis, ’providing increasing market impetus, and analyst expectations that these much needed market returns will transfer into farm gate milk prices’.
“We are hopeful that dairy commodities markets have turned a corner and we will now see a sustained recovery,” said Lyndsay Chapman, Muller’s agriculture director.
“Cream and butter values have shown improvements that are now starting to be realised in our business, although the latter is taking longer to recover due to the volumes of butter in storage. Better returns will lead to higher farm gate milk prices, and we are optimistic in this respect.”
The business has also reiterated its long held commitment to transparent farm gate pricing.
“It is important to stress that our standard price is competitive in its own right, but with the addition of the retailer supplement, actual realisations for Muller non-aligned farmers are substantially higher than those received by farmers supplying other processors who receive similar supplements but choose not to offer the same level of transparency,” added Ms Chapman.
“It is right that this additional and very welcome supplement is aimed at Muller farmers who aren’t already part of one of our supermarket aligned groups. We wouldn’t be able to achieve this if the supplement was simply absorbed into our standard litre price and, as a result, spread across all Muller suppliers including some aligned producers.”
“Whether our farmers are in a supermarket group or not, it is our intention to optimise their actual returns each month."