Milk Purchasing

 

Sourcing our milk

Dairy Crest currently purchases 2.1 billion litres of raw milk per anum. Around 70% of this milk comes direct from over 1,300 direct supplying dairy farmers located throughout England & Wales.

A dedicated team of head office and field based staff are responsible for managing and developing the relationship Dairy Crest has with its farmer suppliers. This relationship encompasses all aspects of milk supply including milk purchasing agreements, farm assurance, milk quality, and, in some cases, the delivery of specific customer requirements.

The team works closely with Dairy Crest Direct (DCD), the elected farmer representative organisation, to ensure better communication and an improved understanding of the issues and opportunities impacting on the partnership. There is regular dialogue between the DCD Board and the Dairy Crest Executive. DCD also engages with our retail customers, promoting greater awareness of key industry issues and the impact on farm.

Since summer 2008 there has been downward pressure on raw milk prices due to the collapse of dairy commodity returns. However farmgate milk prices remained stable until spring 2009. Farm production costs remained high and the poor summer weather further impacted on already fragile farmer confidence. Concerns over declining milk production levels, strong competition for milk supply and weaker sterling delayed and reduced the impact of lower commodity prices. Since February 2009 most UK farmgate milk prices, including those paid by Dairy Crest, have fallen by around 10%.

With UK milk production in long-term decline, securing and increasing Dairy Crest’s direct milk supply is a key priority. The Dairy Crest offer to its farmer suppliers is based on working in partnership to develop a long-term secure relationship and achieve value for both parties.

We have further developed our retailer milk pools for M&S, Sainsbury’s and Waitrose in the year.

The introduction of the Morrisons regional milk initiative in 2008 now means that all our liquid milk suppliers are part of an added value scheme. As milk supply in the UK continues to fall we expect to see more product, factory and customer specific dairy supply chains established.

Customer partnerships have supported innovative projects at farm level. These projects have focused on supporting consumer choice, the environment, animal husbandry and improved supply chain efficiency.

Consumers are becoming increasingly aware of where their food comes from and how it is produced. This means that animal health and welfare and the environment remain in the spotlight and have to be a priority for dairy farmers. We have continued to support our suppliers through the unique independent White Gold Service, raising awareness of how to adopt ‘best practice’ on farm efficiently.

With an increasing focus on efficiency we have fundamentally reviewed our ex-farm milk haulage operation and have decided, over time, to end shared milk collection agreements with other processors. This will also increase the opportunity for marketing initiatives for our suppliers’ milk.

The milk procurement team has held a number of meetings and events throughout the year to provide an opportunity for discussion and debate, and also seek views and ideas of how we can work better together. This process has been very positive and is informing the development of our future plans.

Dairy Crest is proud of its dairy farmer suppliers and their achievements. In a challenging market we continue to work together to deliver value for all our stakeholders. Our farmers are at the heart of the business and key to our success. We will continue to develop and build our relationships to secure a sustainable milk supply for our business.