Archive: DC/MWD proposed agreement - what does this mean for those farmers involved?

Published 13 November 14

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Following the announcement from Dairy Crest (DC) and Müller Wiseman Dairies (MWD) - see here for more - it is important to understand what it could mean for those farmers involved. There are primarily 3 groups of farmers who will be directly impacted by this proposal, those staying with DC, those leaving DC (all of which will be guaranteed a MWD contract if they want one) and those currently supplying MWD. All these farmers involved have the potential to benefit from the agreement.

The 400 or so farmers staying with DC, if the agreement is approved, will be supplying a company with more focus on what have historically been the two more profitable divisions of its business; cheese and spreads. The improved focus could give DC the ability to further strengthen their market position in these divisions. This then could potentially provide more secure margins for the supply chain.

Similar benefits are there for those who might move to MWD and those who already supply them. MWD would increase their liquid capacity close to that of Arla’s meaning there would be two big players supplying the liquid retail sector.This should have a positive impact on the company’s ability to compete in the challenging retail environment. As well as this, MWD will be expanding into more markets, via the potential acquisition of drying facilities and increase in other capacity, giving them an increased ability to move milk around to the markets that suit the business and provide the best returns at that time. All these factors, again, should provide more security for the future.

It is important to remember that this agreement is subject to approval by DC shareholders and the relevant competition authorities. In addition, whether or not the agreement is approved, global volatility will continue to impact UK milk prices in many areas. If the deal goes through then time will tell how much impact this consolidation of the supply chain will have on dampening the impact of volatility for some UK farmers.