November 28, 2008

Dairy Crest, a major UK dairy products company, will cut its organic suppliers' milk price by nearly 4p per litre, but leading milk buyers have no plans to follow suit.

Dairy Crest said it is forced to cut prices from December 1 onward due to falling demand for organic milk, no thanks to the worsening economic condition that is hurting consumers' pockets.

Dairy Crest's milk purchasing director Arthur Reeves said the firm was negotiating with organic certification bodies and DEFRA to allow producers to feed cows conventionally until the oversupply situation was corrected. Reeves also said there is an oversupply of about 30m litres.

However, milk buyers such as the Organic Milk Suppliers Cooperative (OMSCO), Milk Link, First Milk and Arla, said they had no plans to cut organic milk prices, though some admitted the difficult market conditions.

Still, National Farmers Union (NFU) dairy board chairman Gwyn Jones criticised the price cut move as a "mistake" and an "embarrassing lack of strategy".

"This highlights once more the need for proper contracts. The NFU template contract advocates a window for negotiation which would prevent buyers imposing unilateral changes at their discretion. I implore Dairy Crest to look again and see how they can improve the dire situation for their organic producers," said Jones.