Profits up but milk prices down: Interim results show improved finances at First Milk – but lower milk prices have been announced for farmer members from December.
Farmer co-operative First Milk has stated that its turnaround plan is delivering tangible results, with its financial performance in the six months to 30 September 2015 showing significant improvement over the previous year.
Operating profit for the first six months of the year was £1.1m compared to a loss of £7.6m for the same period last year – an improvement of £8.7m.
“The actions taken to reduce costs, improve quality, and drive operational performance are delivering results, with further progress planned over the next year,” said First Milk CEO, Mike Gallacher.
“We are confident that this will deliver improved milk prices and a more sustainable business model for our farmer shareholders. My team and I are very aware of how tough it is at present on farms and the need to sustain this improvement trajectory to deliver benefits to our members.”
Mr Gallacher was appointed CEO at the end of March 2015, and has since initiated significant restructuring, the appointment of an experienced executive team and a new commercially based pricing scheme. Recent restructuring includes the agreed sale of First Milk’s Glenfield Dairy business, based in Fife, Scotland, to Graham’s the Family Dairy.
However, although the financial performance of the business has improved, weak returns and excess milk volumes in Europe led interim chair Nigel Evans to announce reduced milk prices from 1 December: -0.43ppl for creamery pools and the Northern England pool and -0.30ppl for the Scotland pool.
“Obviously as a dairy farmer, I fully appreciate how serious the current market conditions are for members’ businesses. The impact of weak returns and excess milk volumes are being felt around the world,” said Mr Evans.
A First Milk spokesman added: “Part of our improved finances are linked to providing a secure capital base, and it is important that we match our ingoings and outgoings – that was the issue in 2014 when milk prices paid out were over and above the income of the business.
“As a co-operative, our members are already benefiting from the financial improvements through milk collection and marketing, at a time when many others have had contracts terminated during what is a serious time globally for the industry.
“At First Milk the board and management have made a commitment that the price will now reflect market conditions, and have also made a commitment to our farmer members to close the relative price gap per litre over the next two years by 2p a litre.”
Global partnerships for OMSCo
The UK’s Organic Milk Suppliers Co-operative (OMSCo) is developing global partnerships to benefit its farmer-owners.
OMSCo was formed in 1994 by a group of five dairy farmers who joined forces to market their organic milk. Now based in Somerset, it has farms stretching from Cornwall to Inverness, and has grown to be the the largest and longest-established organic milk supplier in the UK with a milk pool of around two thirds of the UK’s output. It is the second largest dedicated organic milk pool in the world, with a turnover of £100m.
In November, the organisation announced an international partnership with the Organic Valley/CROPP co-operative in North America. The historic agreement, in which the two cooperatives will take a membership in each other’s organisation while retaining each cooperative’s independence, will provide international opportunities and domestic flexibility, offering access to new markets, products, technical expertise, and sharing of best practices in organic dairy farming.
“OMSCo and CROPP are the two largest dedicated organic dairy pools in the world, with a combined organic milk supply of almost 1 billion litres,” said Richard Hampton, managing director of OMSCo.
“Over recent years we have developed a close working relationship with CROPP, who is responsible for the marketing and distribution of OMSCo’s Kingdom Cheddar brand – the only European organic cheese available in the US market.
“Our relationship has naturally evolved, and this alliance is the next step. This agreement will allow both cooperatives to market each other’s bulk and branded products and, by working together, OMSCo will be better prepared to satisfy the growing global appetite for organic dairy products.”
OMSCo has also recently been awarded the UK’s first licence to export organic products to China. The initial certification covers 15 million litres of organic milk, worth between €10 and €14 at port of export.