Dairy processor Freshways has told its suppliers the likelihood of paying them 50p/litre from October depends on its competitors’ actions.
The liquid processor will pay producers 50p/litre in September for a standard liquid litre of 4% butterfat and 3.3% protein, but has said this premium above much of the market may be unsustainable.
Instead, Freshways suggested that for this to continue, other processors would have to pay more for milk.
See also: Milk prices rise for September as costs fall marginally
Bali Nijjar, managing director at Freshways, wrote to suppliers to outline the processor’s position on future milk price developments.
Mr Nijjar said: “It is currently our intention to maintain this price for October, but whether we can depends largely on what our competitors do.
“Alas, as it stands today, most have failed to match our price and the current 3p/litre price gap between us and some others is not sustainable.
“For price stability, we need them to close the gap with us, and for commodity markets, which are falling, to stabilise.”
Prices will also be dependent on levels of demand in September, according to Mr Nijjar, and predicting this in the current recession is impossible.
Retail prices
GB retail prices for dairy products were up in July, both on the previous month and on year-earlier levels.
Liquid milk prices averaged 140p for a four-pint pack on 10 July, up by 29.6% on the same time last year.
Freshways said that while retail prices have moved positively, milk is still undervalued compared to other liquid products and milk alternatives.
“We are striving to get more price increases through, but our efforts are being undermined by our competitors holding their farmgate prices,” said Mr Nijjar.
Merger
The merger between Nijjar Group Holdings (Freshways) and Medina Holdings was due to be completed by July.
However, in the letter to suppliers, Mr Nijjar said the integration of the businesses was continuing.
As part of the merger, a previously closed Watson’s Dairy processing site in Southampton is being reopened and this will increase Freshways’ total processing capacity to more than 500m litres/year.
Carbon footprinting
Freshways has begun a carbon footprinting trial with 40 of its farms, to establish what the current carbon footprint is and aim to reduce it in the future.
The company has also removed the plastic dye from its bottle caps to make recycling easier.
