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Dairy Crest and Dairy Crest Direct announce new Milk Balancing Contract

26/02/2016

Dairy Crest (DC) and Dairy Crest Direct (DCD) are this week announcing the new Davidstow Balancing Contract. The contract has been jointly developed by DC and DCD to improve the current milk supply model. It will help ensure that supply of milk is better matched to the requirements of the Davidstow creamery and give farmers more information allowing them to plan for the future.

Ruth Askew, Head of Procurement at Dairy Crest, commented:

“Dairy Crest’s aim, with DCD’s support, is to work in partnership with farmers to grow and expand our brands and products and so, in time, increase our demand for milk. However, the current milk supply model is not sustainable.”

Core volumes have been set at a level which reflects Dairy Crest’s cheese business, in line with current Davidstow production levels. The price of this core volume will continue to be negotiated with DCD on a monthly basis. Should total milk supplies exceed the “core” volume requirements, the excess or “reserve” litres, will be priced using a market-related indicator.

Stephen Bone, Chairman, Dairy Crest Direct, said “Our aim has been to reduce the exposure of our members’ core litres, whilst providing a transparent mechanism to value the reserve litres above factory demand. We believe this contract is an innovative approach to managing supply.”

Farmers have the opportunity to sign up to the new contract during March.

For farmers taking up the new contract, Dairy Crest has agreed to hold prices at the current levels of 22.72ppl* until 31 May, providing core price stability during the spring flush. For those farmers who choose to remain on the existing contract, Dairy Crest is announcing a price reduction of 0.8ppl from 1 April, taking the price to 21.92ppl*. This reduction reflects the on-going deflationary market conditions and cost of balancing excess milk.

* Manufacturing standard litre milk price as per milkprices.com