MILK giant Müller has bitten the bullet and offered its 1900 dairy farmers the opportunity to set-up a dairy producer organisation to strengthen their bargaining position.

The decision whether to do so will be taken by a newly elected Milk Group Farmer Forum which will represent both the company’s 1100 members on supermarkets contracts and the 900 non-aligned producers on its books.

In another concession, the company has also back-tracked on its proposals relating to forecast accuracy – there will now be no penalty for delivery within 7.5% of forecast and relaxed bandings up to 20%. The butterfat penalty has also been reduced from the 0.035p per litre in the original proposal to 0.025p for every 0.01% for butterfat less than 4%, with an incentive of 0.025p for every 0.01% above 4% butterfat.

All this is part of the company’s "dairy revolution", according to Müller Group chief executive Ronald Kers, who pointed out that was investing more than £100 million to increase operational efficiencies at its dairies and create a new generation of added value dairy products made with milk from British farmers, with the potential to deliver additional sales of up to £700m by 2020.

Nominations are now being sought for a 21-member elected Milk Group Farmer Forum. The deadline is mid-March and independently run ballots will then take place in regions where there are multiple nominations.

This forum will have the right to determine levels of any farmer subscription they wish to raise and to review their future representative structure, including whether or not DPO status might be appropriate. It will also elect a Milk Group board who will meet with the company's management on a monthly basis.

Müller has also announced the introduction of a new mil supply contract which will give farmers the option to hedge and fix a proportion of their production based on futures markets, to help achieve greater price stability. This new contract is being sent to all its producers, along with an explanatory booklet, from next Monday February 27, and the business is looking for farmers to sign up by April 21, with the new contract terms in place from May 1.

NFU Scotland milk committee chairman James Rankin said: “There is much for Müller suppliers to consider. On future producer representation, the details of the elections are outlined, and the newly elected reps will have the power to agree any farmer funding and to review the structure. We understand that could include the shift to a producer organisation if so desired.

“The key thing now is for Müller suppliers to attend the forthcoming meetings and put forward the best representative they can for election to the farmer board.”

Dairy industry pundit Ian Potter commented: "It is very clear that Müller have listened to the feedback from the supplier meetings at the end of last year and have amended their offering.

"A crucial part of this for me is the fact that the Forum of 21 will be entirely responsible for deciding whether a DPO will be adopted. I think the electoral accountability is a positive move and its time for farmers to step forward and make a difference."