Dairy Crest to pay farmers more for milk

One of the dairy firms targeted by farmers in blockades this summer today announced it is to increase the amount it pays for milk.

Dairy Crest, which is supplied by around 1,000 dairy farmers, will pay 29p a litre on contracts for liquid milk and Davidstow cheese from November 1.

The increase of around 3p a litre is on top of Dairy Crest's decision to reverse a planned price cut in August and means that its prices are now higher than they were before prices started to come down from May.

The company's plants in Derbyshire and Gloucestershire were the subject of blockades in July as farmers across the UK protested over the declining amount of money being paid for their milk.

Dairy Crest, which supplies around 15% of British milk production, said higher selling prices from its customers and expectations of improving returns from commodity markets had enabled it to raise supplier prices.

The maker of Cathedral City cheese and Country Life butter added: "They are much needed to reflect the higher on-farm costs that all dairy farmers are currently experiencing following the difficult weather conditions this summer."

On Friday, supermarket giant Tesco said the 700 dairy farmers who supply the chain's own-label non-organic milk will be paid up to 31.58p per litre from October 1 - a rise of just over 2p.

Dairy Crest said its own price was competitive as it does not expect its farmers to pay for investment in its dairies or face other charges.

Milk buying director Mike Sheldon said: "As the only major processor in British ownership, Dairy Crest's future is strongly linked to that of our farmers. We want and need our farmers to be successful."

Dairy Crest said its dairies business was facing "unprecedented" market conditions but that it would continue to target a 3% return on sales in the medium-term, including through selling price increases.

With the division recently slumping to a £10.1 million full-year loss, the company has announced plans to close its Aintree creamery and to consolidate milk rounds to allow the closure of 23 depots.

The performance in dairies has been offset by the continued strong trading of its four key UK brands of Cathedral City, Country Life, Clover and Frijj in the six months to September 30, helped by increased marketing expenditure.

Despite the progress, Dairy Crest announced last week that its spreads factory in Crudgington, Shropshire, where 184 people are employed, will potentially close in 2014.

Production at the site, which is primarily involved in making Country Life butter and spreads, is expected to switch to an existing site at Kirkby, Merseyside.

PA