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Medina Dairy basket mechanism no longer ‘fit for purpose’

The dairy has moved away from a basket pricing mechanism following changes across the industry over the past few years.


Alex   Black

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Alex   Black
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Medina Dairy basket mechanism no longer ‘fit for purpose’

Medina Dairy has moved away from its basket pricing mechanism after concluding the mechanism was ‘not fit for purpose’.

 

Terry Ziton, Medina Dairy group commercial director, confirmed Watson’s Dairies, part of Medina Dairy, would be setting its own monthly standard litre price from this month, instead of using a basket pricing mechanism.

 

“For the avoidance of doubt, we remain fully committed to providing all our supplying farmers with a fair and market-competitive milk price,” said Mr Ziton.

 

Changes

 

He said the company had been forced to make a number of changes to the system in recent years, with companies ceasing to exist as a result of mergers and internal company changes, such as with Dairy Crest’s liquid milk business and Arla switching to manufacturing contracts and a more European pricing structure.


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“This has led us to the view the basket mechanism and the company prices which are included in it are not fit for purpose,” added Mr Ziton.

 

He said with the market becoming highly competitive and volatile, Medina needed the ability to respond to rapidly changing market conditions.

 

“We therefore felt this was the right time for us to take control of setting our own standard litre price,” he said.

 

Production

 

He added high production, particularly during the spring flush, was always a worry to any milk processor but it was ‘no more so than other liquid milk processors with no balancing options other than the spot market’.

 

He also denied reports they had suggested farmers could leave if they could find another buyer.

 

“This is not true, other than in the case of a couple of farmers who were already on notice to leave and where we had asked if their new buyer would be prepared to take on their supply early to help us deal with the high levels of milk production being witnessed during the flush,” he said.

 

Unions

 

NFU dairy board chairman Michael Oakes said the union had received a lot of phone calls from farmers worried about the changed.

 

"It may affect their business. They have got to put up with it for at least 12 months. Nobody has seen it as a positive."

 

He added this was why it their work looking at contracts was so important.

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