Muller announce two tier pricing change to add stability to its 1300 direct farmers milk pricing
Posted on: 22/12/22
Muller have today announced it will operate a 2 tier pricing mechanism for farmgate milk pricing from April 1st (A and B pricing).
The concept has been in planning with the Muller Milk Group farmer representatives for several months and given the current near collapse in world commodity prices coupled with increased farm milk output Muller realise this contract change is needed asap.
In fact, today Muller and all other milk buyers have the largest gap between contracted farmgate prices and commodity milk values on record.
Traditionally farmgate milk prices have been a rollercoaster of highs and lows and to ensure continuity of supply and to inject some medium to long term confidence in its 1300 farmers Muller has decided the time is right to change.
The A price will on average be applied to around 94% of Mullers total direct milk intake and this will be on fresh milk destined for Mullers retail contracts which are linked to various premiums and standards and paid for at a contracted price. This farmgate price will continue to have a minimum one month’s price change notice.
The remaining additional 6%, which is predominantly spring milk destined for the drier & powder market will be independently audited by Steven Bradley of www.milkprices.com and will be paid based on transparent global indices. Farmers will be given advance warning of the anticipated farmgate price for the B milk for the coming 3 months but the actual payment they receive will be based on actual numbers.
The change should help dilute what is currently heading towards a crisis as well as provide stability, total transparency and allow Muller to continue to pay a competitive leading milk price.
The B price will at times both exceed and fall below the A price.
For the core 94% Muller customers who place value on the standards farmers produce their milk to it has to come at a cost and commitment and that has to be recognised and paid for particularly the bespoke additional standards. No longer can retailers expect milk prices to simply track commodity prices.