Dairy Crest formula milk price drop for November

Dairy Crest (DC) milk suppliers on the company’s formula contracts are facing another 0.365p/litre price cut for November, based on milk market and input prices in September. 

This will mean a new standard price of 26.715p/litre for those who signed up some of their milk to the formula contract in June or September 2014 and 26.905p/litre for those who signed in April 2014.

Three of the five parameters used to calculate the formula price – fertiliser, concentrate feed and the retail price of a four-pint carton of milk – recorded no change in September compared with August.

See also: Dairy Crest formula milk price to fall in 2016

Cream was the only element to increase, while red diesel price fell again.

Feed ingredients wheat, soya and rapeseed values reduced again and soya at £254/t was the lowest since December 2011, said DCD.

Underlying concentrate prices are expected to continue to drift lower as ingredient costs decline.

There is an element of rolling sequencing within the formula pricing mechanism, which has the effect of smoothing volatility from previous months.

Despite the November drop, the price was still above 26p/litre and competitive, said producer organisation Dairy Crest Direct (DCD).  

The latest cut to the formula prices means that those who have chosen to put some of their milk on to the simplified and the most recent core formula contract applicants will be getting 4.905p/litre more for this milk than for the milk they supply to Dairy Crest on a standard liquid contract.

“As cream markets continue to improve, and if concentrate and fertiliser costs can remain relatively stable as they have during September, this would indicate that the existing run of six consecutive DC/DCD formula price reductions may be coming to a close from the next review,” DCD told members in its communication of the price drop.

About half of DCD’s producers are on standard liquid milk contracts and about half of those in turn have opted to put some of their volume on the formula contract.

In December 2014 a rebasing of the DC/DCD formula was announced for milk prices from January 2016.

This will cut a further 1.60p/litre off formula contract prices before the impact of any November 2015 changes to the price of any of the five elements on which the prices are based.

Producers on DC/DCD formula contracts can choose each quarter to change the percentage of their milk committed on the core formula, with 31 December 2015 being the next date at which they can apply for a change.

Any requests for changes would take effect from 1 January 2017.