Dairy Crest and DCD have confirmed their intention to offer farmers on standard Liquid contracts the opportunity to move to a groundbreaking formula based milk price from April 1, 2013.

The formula price mechanism has been developed by Stephen Bradley, who is well known and respected within the dairy sector for his milk price comparison website, milkprices.com. Stephen Bradley was jointly appointed by Dairy Crest and DCD with a brief to find a simple, more transparent formula method of agreeing the milk prices currently negotiated between the two parties.

Both Dairy Crest and DCD hope that its adoption will help take some of the heat out of milk price negotiations and address some of the challenges seen earlier this year.

DCD chairman David Herdman was very positive about the joint pricing initiative and what had been achieved to date.

“The process we have been through with Stephen has been very thorough,” he said.

“Details of the actual formula calculation are currently being finalised but it will take into account movements in both key on-farm costs and dairy market indices.

“I believe this is a real step forward in our commitment to find a better way to agree farmgate milk prices for DCD members.”

Dairy Crest’s Group Milk Procurement director Mike Sheldon explained how the new formula is expected to be rolled out: “We will offer the formula driven price to our farmers on a voluntary basis.

Initially we plan to agree an overall maximum milk volume to be priced through the formula with offers being confirmed on a ‘first come, first served’ basis.

We want a long-term relationship with our farmers and are determined to deliver greater flexibility and choice in the consideration of contract options, as well as trust in the pricing process.”

Further details about the price formula will be provided over the coming weeks, together with training workshops.

Both Dairy Crest and DCD have committed to ensuring farmers fully understand how the new formula will operate so that they can make informed decisions about their businesses.

Dairy Crest, with the support of DCD is continuing to recruit farmers to increase its direct milk supply.

Feedback suggests that the potential to supply milk on a formula price will be an attractive option for new suppliers.

For more information contact: Mike Sheldon, Dairy Crest on 07831 129565 or David Herdman, DCD on 07720 657163