NFU Warns UK Milk Buyers Amid Rising Spot Prices

The National Farmers' Union (NFU) has formally warned UK milk buyers to comply with contract terms and provide transparent pricing, as stated by NFU Dairy Board Chair, Ian Harvey. This warning comes in light of recent weather changes that have reduced pasture growth, leading to a more than 3% drop in national milk deliveries and causing spot milk prices to climb to nearly 50 pence per litre (ppl).

Despite this increase in spot prices, farmgate payout adjustments have not equally reflected the market's upward movement across different regional supply pools. While producers on aligned contracts benefit from prices above 40ppl, non-aligned suppliers are receiving significantly lower prices in the mid-to-late 20s per litre, which is below the baseline cost of production.

The NFU is concerned about the administration of contractual volume management schemes, which include tiered “A,” “B,” and “C” volume structures designed to handle seasonal surpluses. With spot prices now exceeding core “A” volume thresholds, Harvey insists that processors adhere strictly to contractual terms and transparently demonstrate the pricing for lower-tier milk volumes. This is to ensure that processors are not inappropriately merging discounted tiers while using the milk for premium product lines.

The reduced milk yields pose long-term risks for British dairy herds, particularly as farmers have been forced to use additional winter forage and supplementary feeds during the summer heatwave. This could lead to feed shortages later in the year if rainfall does not improve grass growth. Therefore, a fair price recovery is essential to help producers cover the increased summer feed costs and build financial resilience.

Despite current challenges, the NFU notes the positive outlook for the UK dairy sector, with nearly £500 million planned for processing infrastructure investments over the next decade. This investment aims to tap into the growing global demand for high-welfare, sustainable dairy products. The NFU emphasizes the importance of maintaining transparent and fair relationships between processors and farmers to safeguard domestic production capacity.