Farmers hit by Dairy Crest cut to milk production price

Dairy Crest says it has no alternative because of market pressures

Dairy farmers in Wales say a decision to cut the amount they are paid for milk with just four days' notice will hit them hard.

Milk processor Dairy Crest will pay 2p a litre less to around 575 UK farmers from the start of next month.

The Farmers' Union of Wales (FUW) said the decision was a "disgrace" and meant milk producers would receive 3p to 4p per litre below the production cost.

Dairy Crest said it had no alternative because of market pressures.

The cut means that on an average sized dairy farm producing one million litres of milk a year, income would drop by £20,000, a cut of around 7%.

There are concerns other processors may now follow suit.

FUW dairy and milk committee chairman Dei Davies said farmers were being put in an impossible position.

"Dairy farmers are often adversely affected by poor contracts," he said.

"They may be required to give 12 or more months' notice to pull out, but the price the farmer is paid can be changed at a few days' notice by the processor."

Steve James, deputy president of NFU Cymru and a dairy farmer in north Pembrokeshire, said there was no need for such a drastic cut.

"I'm sure there's going to be a lot of annoyed farmers out there at the moment, particularly Dairy Crest suppliers, and maybe some of the farmers supplying some of the other processors might be a bit fearful at the cuts coming forward," he said.

"At the moment there's no reason for it because the world price has dipped a little bit but we were a long way behind that last summer.

"We gradually built up and didn't quite get to the world price over the winter and now they're starting to cut it again and farmers will be very annoyed."

Dairy Crest said it was taking a series of steps to secure the future of its dairies business in a challenging market.

It said the whole dairy sector was suffering from steeply falling commodity prices.

Mike Sheldon, Dairy Crest's group milk procurement director, said: "After such a strong year for milk prices in 2011, we are very disappointed to have to reduce the price we pay our farmers and we have delayed this decision for as long as we could.

"We know that milk production costs remain high and that this will be a blow to those of our farmers who are affected.

"However, the market pressures on our dairies business mean that we have no alternative."

Earlier this month, Dairy Crest began consultation with nearly 500 employees on the closure of two dairies, at Liverpool and Cambridgeshire.

The company said the closures would protect the future of the dairies side of its business.

Dairy Crest buys milk from around 1,300 dairy farmers, with most located in southern and central England and south Wales.