Market Drayton-based dairy giant Muller's milk price hits three-year high in boon for farmers

From October 1 the Market Drayton-based yoghurt maker will add a penny to the price it pays for each litre of milk for suppliers on the Muller Direct Contract, taking the farm gate price to 30p per litre.

The last time Muller paid that much to farmers was in September 2014 – shortly before the market began a deep dive which saw prices tumble to less than 20p per litre.

Now the sector has rebounded after that wounding period which saw many exhausted farmers give up on the industry. Various dairies have been increasing their prices in recent months, but Muller's latest move represents a milestone for the recovery.

The increase for 700 farmers on the Muller Direct contract – those whose prices are not aligned to supermarkets – reflects an increase of more than 50 per cent since October 2016.

It also takes the price to about the break-even cost of production, which is estimated to be about 30 to 32p per litre.

Muller's agriculture director Rob Hutchison said: “These are positive developments for Muller Direct farmers.

"We are pleased with the response we have had to the steps we are taking to ensure that farmers who supply us have a competitive milk price and an increasing number of tools available to manage their businesses through the markets which we operate in.”

The higher price reflects better returns from markets for cream and butter, and comes on the back of efforts for greater collaboration with farmers to try to manage production levels and prevent further price depression.

Muller has also confirmed "healthy interest" from suppliers in its Muller Direct Futures Contract, which allows dairy farmers to agree a monthly price for up to 25 per cent of their milk for up to 12 months in advance.

It is designed to offer higher levels of certainty over future milk price returns, an issue which had been raised as the milk price started to recover from the slump.

The contract will be discussed at a series of meetings over the next week with farmers who sign up having the opportunity to apply in September for the first 35 million litres to be made available under this contract.

Two further tranches of milk under this contract will be offered to Muller Direct Farmers in January and April 2018.