First Milk to defer payments to farmers as dairy prices drop

Will Green is news editor of Supply Management
12 January 2015

First Milk has announced it will defer payments to farmers by two weeks in response to financial pressures caused by a fall in dairy prices.

First Milk, a co-operative owned by its almost 1,300 farmer members, said the move would improve the business' cash flow by £10 million.

The organisation has also increased members’ financial contributions to the business, which had revenues of £530 million in 2012-13.

At a meeting last Thursday, First Milk’s board agreed to defer payments to farmers planned for 12 January until 26 January, with all future payments put back by two weeks.

The move comes against the background of a 50 per cent drop in the price of milk over the past 12 months.

Chairman Jim Paice said the changes would “deliver a cash injection into the business and play an integral role in putting our finances and our business on a stronger platform”.

“We are a business owned by dairy farmers,” he said. “The board are acutely aware of the difficulties this current extreme volatility is causing First Milk members and the UK dairy industry.

“We don’t know how long this current market downturn will last, and we are aware that hundreds of UK dairy farmers are unlikely to find a home for their milk this spring.

“Our priority is to make the business and our processing assets as secure as possible in order that we can continue to process and market every litre of our members’ milk.”

The NFU has said the dairy sector is “suffering from crippling price cuts” and the number of dairy farmers has halved since 2002 to 9,960 in England and Wales. It predicts there could be fewer than 5,000 left by 2025.

President Meurig Raymand said he was challenging First Milk to “get out and explain to their farmer suppliers what these changes are and explain how it will impact them”.

He said some farmers were facing their lowest milk price since 2007, at around 20p per litre, while farm costs were 36 per cent higher than eight years ago, with animal feed more than 50 per cent higher than 2007 levels.

“This combination has left many producers under extreme financial pressure and fearing for the future of their dairy businesses,” he said.

“We will continue our difficult but necessary discussions with all the processors as well as with retailers. What we want is an economically sustainable dairy industry for the future.

“As farmers face volatile markets, I’m also convinced that the government can do more to help by ensuring its policies are sympathetic to the current situation and will help farmers and farming businesses continue forwards.”

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