Dairy co-operative delays payments to farmer-members

Dairy co-operative First Milk has delayed dividend payments to farmers due to a fall in the price of milk.

The organisation, owned by over 1,000 farmers, said dairy demand has fallen by over 50% throughout the past 12 months. Since October there has been a gap of 1 pence per litre, which has restricted the cash available to give to farmers.

First Milk’s chair, Sir Jim Paice, said: “While our lenders have been supportive as we’ve dealt with this volatility, with the added uncertainty of the imminent EU quota removal, the board has taken the decision to re-build the fundamentals of the business ahead of the spring flush.”

He announced that all payments will be deferred for two weeks, and that the board is taking additional steps to increase capital, which includes extra fees from members by levying an extra cost of 1.5p per litre to 2p until August.

Added Sir Jim: “”We understand that the milk payment deferral will cause concern for members as direct debits and payments will have been lined up against milk cheques. On that basis, we are working with all major banks at national, regional and local levels to explain the rationale around this decision. That way, bank managers should be well equipped for any conversations they have with First Milk members.

“We are a business owned by dairy farmers. 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.”

What’s happening? Hear from vice-chair Nigel Evans:

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National Farmers Union president Meurig Raymond blamed supermarket price cuts: “The recent milk price cuts, from most processors, have had a massive impact, with some farmers now facing their lowest milk price since 2007, at around 20p per litre. At the same time, farm costs remain some 36 per cent higher than they were eight years ago and the single largest cost component of a dairy farm, animal feed, is more than 50 per cent higher than 2007 levels.”

He added: “It is quite clear that this announcement will be a serious burden for farmers and will be damaging to cash flow at an expensive and demanding time of year for costs. It is essential at this time that banks understand and are supportive of our farmer members so they can continue to finance their businesses. I will be personally contacting all the main agricultural banks to ask them to do so. It is so important at this difficult time for the dairy industry that the financial health of First Milk is secured.”