Morrisons New Cheese Price Model

Morrisons, in partnership with First Milk, is trialling a new system to determine the price it pays farmers for milk for cheese production.  A small group of ‘pioneer’ farmers will trial the new model.  Unlike other pricing systems announced recently, it will be used to set the price the retailer pays the co-op for the cheddar and also the price of the milk from which it is produced.  Prices for mild cheddar, butter and whey powder for the previous three months will be fed into a formula and will be used to fix the price for the next quarter.  The trial is for Morrison’s own label cheddar.  With this type of approach, the processor is not taking all of the risk as is the case with other market related price formulas recently announced.  Farmers will benefit from when the market is rising, but obviouslythis will be the converse when the market is falling.  With no link to production costs in the formula, farmers will be worse off if input costs rise more than commodity values.