THE possible closure of two Dairy Crest processing plants would represent a welcome rationalisation of the sector, according to NFU dairy board chairman Mansel Raymond.

Mr Raymond said the loss of jobs resulting from the closure of Dairy Crest plants in Aintree, in Liverpool, and Fenstanton, in Cambridgeshire, would be ‘regrettable’.

He said the union was keen to discuss the full implications of Dairy Crest’s announcement that is entering into consultation on proposals to close the two plants later this year.

Mr Raymond told the NFU council on Tuesday (April 17) that the decision was driven in part by Tesco’s decision to stop sourcing liquid milk from the processor from July. The decision to cut its liquid milk suppliers from three to two has cost Dairy Crest sales of approximately 100 million litres, he said.

However, he said that, while the NFU recognised the potential impact on employees at the two plants, the move could help make the industry more efficient.

“This is a rationalisation of the processing sector, which is something we have called for. This is the processing sector taking costs out, which we have also been doing,” Mr Raymond said.

Commenting on the wider market situation, he urged other retailers and processors to refrain from following Tesco’s move to cut the price paid to its milk suppliers. He told NFU council that, with milk production costs typically 29-30ppl, any further price cuts beyond Tesco recent 0.65ppl reduction would be ‘catastrophic’.

“The position on milk has been weakened by the Tesco announcement. But we are stressing that this is a formula linked to cost of production, so there is no reason or excuse for others to follow on the back of this.

“A lot of producers are not even receiving enough to cover the cost of production, so any further price cut would knock the confidence of the industry back into touch immediately,” he said.