DAIRY GIANT Müller has confirmed that its farmgate milk price is to be cut by a penny to 27.50ppl from January 1, 2019.

This means that Müller Direct farmers who satisfy the conditions for the direct premium will receive 28.00ppl on their qualifying litres.

The firm said that the penny per litre reduction in its price reflected continuing declines in the market value of dairy commodities like cream and butter.

For the first time, the cut bring's the company's headline price including that direct premium into line with the price offered to farmers through the Müller Direct 'Fixed Price' contract option, created to offer a ‘safety net’ against market volatility. More than a third of the 700 Müller Direct farmers opted to commit up to half of their milk supply to that fixed price contract option.

Milk supply director Rob Hutchison said: “We are continuing to see declines in returns from markets for cream and butter and like most processors exposed to the liquid milk sector, we are not in a position to ignore market realities.

“We are pleased that so many Müller Direct farmers have opted to use the measures we introduced to manage the effects of extreme market volatility. Those who opted in know that for that portion of their milk supply, they are fully protected from further negative market movements.

“We know that contract innovation of this kind is increasingly recognised and valued amongst dairy farmers who operate in markets which are consistently volatile,” added Mr Hutchison.