A FARMGATE milk price of 30p per litre is once again in producers' sights – at least according to NFU Scotland’s milk committee, which declared this week that the rising commodity market could propel the dairy sector past that magic figure.

It was prompted by the news that farmer-owned co-op First Milk will introduce a producer price increase of 1.2 pence per litre from July 1 on its liquid standard litre, taking that to 27.20ppl.

Welcoming that increase, and noting the other milk price movements of recent weeks, including rises from Arla and Muller, NFUS milk committee chairman, John Smith, a dairy farmer from Campbeltown, commented: “We firmly believe that a farmgate price of 30p per litre is achievable. It is essential that all parts of the supply chain ensure strengthening markets are reflected quickly in prices.

“There are many different milk contracts out there and achieving all the quality and production bonuses will be a challenge for some, but the tone of the market is definitely changing," he insisted. "More increases must follow as futures markets and physical sales of commodities are both very positive.

“Key price indicators, the Actual Milk Price Equivalent and Milk for Cheese Value Equivalent now sit at an average of more than 33p per litre," pointed out Mr Smith. "Prices for milk powders, butter and cream are all up by more than 10% in the past month."

During a visit to First Milk's base in Paisley, the milk committee members heard more about the co-op’s recent move back to a simpler pricing model for all members, and the development of a strong farmer governance structure.

The committee also discussed the need for a more open dialogue with milk buyers on Red Tractor standards and the prospect of legislation on dairy contracts, after Defra accepted a recommendation from the Grocery Code Adjudicator that dairy farmers are disadvantaged by an imbalance of power in the dairy supply chain.

Union milk policy manager George Jamieson said: “NFUS and our fellow UK unions are very clear that we see this as massive opportunity for the entire dairy supply chain to develop an agreement on contracts that build trust, fairness and efficiency, resolving the key factors of pricing, volume and volatility.

“That there is a problem is clear to see," said Mr Jamieson. "Any progressive processor confident in their business and who values their milk supply should view this initiative as an opportunity. Sadly, the reaction of some processors is to view this as a threat and are already using 'fear' tactics to cloud the issue.”

Speaking for First Milk, its vice chairman Jim Baird said that the co-op was focused on developing customer relationships and expanding its business: "To meet growing demand and further improve our operational performance, we have recently started a £6.5m investment project at our creamery at Haverfordwest that will expand capacity by 20%.

"In addition, we have been proactively taking on new members and suppliers across the country, with additional milk volume coming through in the year.”