Introduced from 1 July this year, the formula was developed collaboratively by Müller Wiseman Dairies and dairy farmers elected to represent all Müller Wiseman Milk Group members.
The price is calculated using publicly available benchmarks:
Dairy farmers were given the option to sell all or a portion of their milk to Müller Wiseman Dairies using the formula price, to a combined maximum of 110 million litres this milk year.
Existing and new Müller Wiseman Milk Group members are also entitled to valuable expansion and recruitment incentive payments each worth up to an additional 1ppl on all litres produced, as a 13th payment.
Martin Armstrong, supply chain planning director for Müller Wiseman Dairies, said: “The formula price will perform very well in a strengthening market for global dairy commodities, but equally could suffer a sharp correction if commodities decline in value in the way that they did in 2012.
“Dairy farmer members were given the option to opt in to this formula in line with their attitude to risk and many have chosen to hedge by committing a portion of their output to the formula while maintaining the rest of their supply through the Müller Wiseman Standard Price, which is less volatile and reflects competition in the fresh milk sector (currently 31.5ppl).
“The prices of both options are extremely competitive and benefit from an additional production incentive of up to 1ppl and it should be stressed that they are not then eroded by capital levies, membership retentions, transport or balancing charges.”
Source: Müller-Wiseman Dairies
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