The company, which runs an ‘AB’ pricing formula, announced last week it will be cutting the milk price paid to its producers. The AB pricing system sees farmers paid the full liquid price for 90 per cent of their milk under the ‘A’ pool. Further supply over and above that is paid a ‘B’ pool price, on what Graham’s calls ‘surplus’ litres of milk.
Graham’s announced that the ‘A’ price, which producers will receive on the bulk of their milk, is to be cut by 1.5 pence per litre (ppl), reducing it to 23.75pp. However, milk in the ‘B’ pool will be cut by 7p, effectively halving it to 7ppl. The Union believes that Graham’s will be the only milk buyer in the UK to pay farmers less than 10ppl for a proportion of the milk that they produce.
It is thought that of around 100 Scottish producers currently supply Graham’s, the majority will be affected by the cuts.
Commenting on the price cut, NFU Scotland’s Milk Committee Chairman Graeme Kilpatrick said: “NFU Scotland has continually asked that milk buyers act in a transparent way and give farmers appropriate notice of any major changes to payment terms.
“Milk producers who supply Graham’s have been left angered by the way this latest price cut has been communicated. Many have invested greatly in their businesses over four to five years, but will now be left seriously considering their options.
“For such a major change a meeting with the producers should have been called to discuss the situation before any announcement was made.
“NFU Scotland has arranged to meet with Graham’s the Family Dairy in the next two weeks to discuss the negative implications that this change will have on their farmer suppliers.
“It is clear that the continuing pressure on international commodity markets is affecting milk prices domestically and though market falls can be rapid, we believe that milk buyers have a duty to alert producers in a reasonable fashion so that they can adjust their production and avoid the damaging impact sudden price changes can have.
“When the ‘AB’ pricing model was introduced by the company the supposed advantage to farmers would be the predictability and security necessary to manage production. However, with ‘A’ prices being cut and ‘B’ price formulas being changed suddenly at the discretion of a milk buyer there is major concern amongst farmers. It is vital that other milk buyers give producers fair warning of price and contract changes.
“These are unprecedented times for Scottish dairy farmers. There are tough decisions having to be made on a great number of farms and it is worth taking the time to consult with bank managers, accountants and farm advisors about any recent milk price drops which may lead to cash flow difficulties and impair short to mid-term business stability.”
Source: FarmingUK