Müller-Wiseman, one of the UK’s biggest dairy processors, has reversed summer plans to cut milk prices and is instead lifting the price it will pay to farmers by nearly one tenth in a move to win new suppliers and boost market share.
Next month the group will increase its standard farmgate milk price by 2½p to 29p a litre, a record in the 65-year history of Robert Wiseman, which was bought by Müller, the German yoghurt maker, for £279m earlier this year.
The group said that the price rise, along with simpler and more flexible contracts for farmers, were part of its strategy to expand, organically or by acquisition.
It comes days after Arla, its rival and the maker of Lurpak butter, said that it would raise the price paid to most of its suppliers to 29½p a litre of milk.
Arla, a co-operative that is owned by Dutch, German and Danish farmers, is halfway through merging with Milk Link, the UK co-operative that would turn it into Britain’s biggest dairy processor with 2,900 farmer-suppliers.
The price rises follow a summer of negotiations led by Jim Paice, farming minister, which were sparked when thousands of dairy farmers protested that price cuts then proposed by the dairy processors and inflexible contracts would put them out of business.
Milk processors said at the time they were squeezed by sharp falls in the price of milk, butter and cream, and retailers keeping milk prices low.
In recent weeks, however, dairy prices have strengthened after the dank summer which has depressed milk supplies and retailers are paying more. The Co-operative this week said it would raise the price it pays its farmers to 30p a litre. Meanwhile, MPs have pushed dairies to ease the terms of legacy contracts with farmers.
Müller-Wiseman recently announced an initiative to find new ways of determining farmgate milk prices using a proposed voluntary code of practice on contracts, brokered by Mr Paice, as a framework.
It added on Thursday that the new 29p price will apply to about 300 farmers who supply the group and are not tied to supply contracts agreed with supermarkets such as Tesco, J Sainsbury and the Co-operative.
Arla’s new price will apply to most of its suppliers, except farmers tied to supermarket contracts based on production costs.
Earlier this week, Dairy Crest, the third dominant processor, announced that it was “confident” that it would be able to deliver higher milk prices for farmers this autumn. Its shares, which touched a year’s high of 359p last October, were up 2 per cent yesterday to 353p.