Dairy Crest has launched a formula-based 12-month contract for non-aligned direct suppliers.

The formula price mechanism tracks five costs - bulk cream, retail liquid milk, concentrates, fertiliser and red diesel - and then calculates a monthly milk price. It goes a step beyond the current cost of production model and provides more warning for farmers on market-driven price cuts, the company said. As a consequence, it will deliver the market highs and lows.

Dairy Crest said it hoped the move would provide greater transparency in pricing. The contract is fully compliant with the dairy voluntary code of practice, the group added.

The offer will initially be extended to Dairy Crests 600 non-aligned suppliers.

Competition in the UK market to secure milk supplies appears to be intensifying. Earlier this month, Muller Robert Wiseman launched a recruitment drive.