Dairy Crest's campaign to persuade farmers to reduce the seasonal swings in milk production has passed another milestone, contributing to a year of "strong" operational progress.

The maker of Country Life butter and St Hubert spreads has slashed to about 50m litres its excess supplies of milk, down 50% year on year, and cut of 90% compared with the surfeit 10 years ago.

The reduction follows a campaign by the UK dairy group to tailor milk purchases as closely as possible to requirements, reducing the need to turn to commodity markets to sell the excess, either as skimmed milk powder or butter.

"That entails risk. Shareholders in a plc do not really want to take much risk," a Dairy Crest spokesman told Agrimoney.com.

Farm techniques 

The group's efforts to cut the seasonality of swings in milk supplies, which tend to rebound strongly in spring from a winter low, has involved paying farmers a bonus for reducing volatility.

"Farmers can reduce seasonality through calving all year round, higher feed use in winter," the company spokesman said.

"We recognise all that costs, and pay farmers more for a flatter supply profile."

The company's quest for stability has also extended to offering some milk suppliers longer-term, fixed price contracts, and to closing its final salary pension scheme, as of today, when its financial year ends.

'Remain challenging' 

The group said the year had been one of "strong progress", helping it achieve pre-tax profits in line with analysts' forecasts.

"Stronger brands, a lower cost base and increased focus leave us much better placed than a year ago," Mark Allen, the Dairy Crest chief executive, said, while adding that he expected the group's trading environment to "remain challenging".

The trading update was rated "in line" by Damien McNeela, the Panmure Gordon analyst, who kept a "hold" rating on Dairy Crest shares.

The stock stood 2.7% higher at 371.8p in London.