FIRST Milk is to introduce a new A and B pricing system for all of its producers from April 1.

It said one of its core objectives is to have clear pricing mechanisms which rewards members for producing the volume, quality and profile required for it's processing sites and main markets.

Sir Jim Paice, chairman, said 2014 saw unprecedented volatility in commodity markets and surge in milk production which drove prices down and "seriously challenged" the mechanisms the co-operative used to set the price of milk.

The Board and farmer representatives have now agreed the new system. The three main changes from April 1 will be the introduction of A&B pricing; closer alignment of butterfat, protein and hygiene payments, according to the end use of the milk; and clarification on First Milk's two main milk pools – manufacturing and balancing.

In a statement First Milk said: "The Board firmly believes that implementing these changes will benefit members by quickly and clearly reflecting market returns. This will enable members to make more informed production decisions, to take advantage of market upturns, or mitigate their exposure to market falls.

"These changes also give members the opportunity to achieve a higher milk price by tailoring their production to the specific market requirements for their milk."

At the beginning of March members will receive a letter and new pricing schedule, setting out how the changes will be implemented, specifically for their own milk supply. Local "drop-in days" will also be held when they can go through calculations for their own farm, using the new schedule.