A dairy co-op has struck a deal with Tesco to improve milk prices for members who supply its Haverfordwest creamery. But Scottish members will not benefit, even though they invested in the plant.
Farmer-owned First Milk has spent £9.5m on capital projects at Haverfordwest in Merlin’s Bridge, west Wales, over the last two years. It produces cheese for Tesco and other companies, via a partnership with Adams Foods, at the plant.
Under a new arrangement, Tesco will pay its Tesco Sustainable Dairy Group base price to suppliers of milk for cheese at the creamery. These farmers will receive a Tesco winter supplement between 31 August and the end of February 2016.
NFU Scotland president Allan Bowie said the move bypassed Scottish farmer members, who had contributed towards improvements at Haverfordwest.
“We’ve been hearing from them very strongly that they’re in opposition to this,” he said. “This is the first time there’s been a market uplift. They’re looking for benefits from all sites but this deal only benefits one particular milk field, which was created by First Milk’s new management.”
He said First Milk’s manufacturing base in Scotland was inadequate. Although First Milk had invested in its Campbeltown creamery, aided by £450,000 of support from the Scottish government, there was no other added-value plant to take volume. Members in Scotland’s central belt, including a significant number of farms with around 150 cows in Ayreshire and Lanarkshire, were heading south to try to find a market.
“These farmers have been loyal to First Milk,” he said. “NFU Scotland has stressed to First Milk that the business must act in a way that benefits them.”
Argyll and Bute MSP Michael Russell also criticised the decision. During a Scottish Parliament debate on 23 September he said: “Those who supply the Haverfordwest plant will get a huge boost in payments, but all the other members, whose money has gone to equip and run it over the years, will get nothing.
“When is a co-operative not a co-operative? The answer is when it is run by First Milk.
“I appeal to First Milk to rescind that decision to help all its members to survive, not just some. The members of First Milk have much money tied up in the company and they want it to succeed, but if First Milk turns its back on them just when they need it most, it will forfeit all right to respect and continuing support.”
Mr Russell said First Milk had been “disastrously run”, and the future of the dairy industry in Argyll and Bute “hangs on a knife edge”. “If there isn’t a significant price rise or significant intervention before the winter sets in, with increased feeding costs, many of those who are presently in the sector will leave it, no matter the cost to them,” he said.
A First Milk spokesperson said: “The additional funds from Tesco are generated by cheese which is produced only at our Haverfordwest creamery. This decision is in line with the value-driven pricing we have in place. It also gives us the best opportunity to build a stronger relationship with the UK’s largest retailer.
“We’ve made investments right across the country. This has included substantial investment at both Campbeltown and Glenfield near Fife. The bulk of the Haverfordwest investment over the last couple of years has focused on driving efficiencies, e.g. new boilers and effluent plant. Similar projects have been put in place at the Lake District and Campbeltown creameries.”
First Milk chief executive Mike Gallacher added: “Tesco has a strong track record in supporting British dairy farmers and we warmly welcome this move on cheese. It allows us to directly pass on the benefits to First Milk farmers who supply the milk that produces Tesco’s cheese. This move will be valued by all dairy farmers and British consumers.”
Chair Sir Jim Paice added: “Tesco’s leadership here is a very significant step in building greater sustainability within the production of high quality British cheese and the dairy farmers, who produce it. British consumers have demonstrated their support for farmers across Britain who are receiving less than the cost of production for their milk.
“While we’re working with others to address this situation, the move by Tesco on cheese demonstrates the difference that can be made by a company who quickly steps up to the mark and takes effective action.
“First Milk generates £180m per year of economic activity in Wales and the series of investments being made at our Haverfordwest creamery are all about furthering the interests of our farmer owners. We have a strong core business which makes a significant contribution to the Welsh economy and through our innovation pipeline we’re securing an exciting future, adding greater value to every litre of our members’ milk.”
First Milk produces annual revenues of £610m (2013/14 figures) and is headquartered in Glasgow, with seven manufacturing sites across England, Scotland and Wales.