Dairy Crest plans to tackle milk price row

One of Britain's largest milk suppliers is relaxing rules that tie crisis-hit farmers into lengthy 12 month contracts.

Dairy Crest, which supplies around 15% of British milk production, said farmers will be able to move their milk supply with three months' notice if they are unhappy with price changes, instead of the 12 months currently.

The move will give farmers more flexibility and comes as part of measures to help offset the impact of damaging milk price cuts on the industry.

But the change will not come into effect until after Dairy Crest's 1.65p per litre price cut planned for August 1.

Dairy Crest - behind well-known brands Cathedral City, Clover and Country Life - is one of a number of milk producers that have slashed the price they pay farmers for milk after seeing the value of cream plummet this year.

The National Farmers Union (NFU) said it welcomed the decision by Dairy Crest to reduce the notice period for milk suppliers.

But it warned farmers wanted to see a reversal of the price cut and would demonstrate again if the reduction was not scrapped.

More than 2,500 farmers gathered in London last week to protest about the cuts.

Robert Newbury, chief dairy adviser at the NFU, said: "I'm glad to see Dairy Crest is moving to improve the way it deals with farmers.

"But the clear call from farmers is that the price cuts should be reversed."

Dairy Crest's latest price cut follows a 2p per litre reduction in May and will see farmers paid just under 25p a litre for milk - less than the 30p a litre it costs to produce milk, according to the NFU.

The NFU said there are fears many milk farmers will be forced out of business.

Mr Newbury said: "It's taking them to an impossible price to maintain and many aren't sure if they'll now make it through the winter."

Dairy Crest is appearing in front of MPs today to face questions on the crisis, alongside supermarket chain Asda and farmers' representatives.

The group admitted its milk price cuts had "put pressure on our supplying farmers".

Mike Sheldon, group milk procurement director at Dairy Crest, added: "We fully understand the difficulties our farmers face and we have been working with their representatives at Dairy Crest Direct to explore what we can do to further improve our milk contracts.

"Weak cream prices have increased this pressure so we have stepped up our efforts to provide support, and we are pleased to be able to announce what we believe is a significant step forward at this stage."

Alongside the change in notice period - which will apply to its standard milk supply contract farmers - Dairy Crest has also agreed to give farmers four weeks' notice of any price changes and appoint an independent consultant to review the mechanism behind the company's milk pricing process.

The group has already agreed not to cut prices further for standard milk supply farmers this year, following the planned reduction next month.

Dairy Crest has 1,300 direct milk suppliers, who between them supply around 1.7 billion litres of milk a year.

Just under half of its milk suppliers are on the standard contracts and have been hit by the recent price cuts.

Dairy Crest, which is also holding its annual shareholder meeting today, confirmed its dairy division was continuing to suffer from difficult market conditions, which saw the group slump to a £10.1 million loss in its last financial year.

The company, which employs 4,000 people in its dairies business and 6,000 people overall, has seen its dairies division struggle from intense competition among "middle ground" customers, such as small retailers.

It is slashing costs and announced in April it will close two dairies to help turn the division around.

But it said total sales of its key brands, which also includes Frijj milkshakes, had increased by 15% in the past quarter.

PA