UK – Farmers are criticising dairy processor First Milk over its communication of business restructuring, including deferral of payments to suppliers, aimed at delivering a cash injection to the business.
The farmer owned cooperative has come under fire after delaying payments by two weeks, starting today, and increasing the rate of capital contributions from members.
The measures are a response to market volatility and a drop in dairy prices of over 50 per cent in recent months.
Royal Association of British Dairy Farmers chairman Ian Macalpine has said First Milk’s suppliers are being put under “enormous stress”, and called on the board to be “honest and up front”.
First Milk has also come under fire from the National Farmers Union and its President Meurig Raymond who has today challenged First Milk to explain the changes and how it will effect farms.
On Thursday, First Milk announced actions to put in a “stronger platform for 2015".
First Milk also reversed February price cuts on manufacturing and liquid pools by 1.1 pence per litre, reducing cuts to 1.33 and 0.5 pence per litre respectively.
Justifying the changes, First Milk said the aim was to deliver “a cash injection to the business” in what was a year of uncertainty, created by quota abolition.
"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," said First Milk chairman Sir Jim Paice.
The changes have left farmers supplying First Milk uncertain of the future of their dairy businesses, according to Mr Macalpine. This accompanies an NFU announcement showing 60 dairy farms left the industry in December, taking overall numbers to half the number in 2002.
“They need to be informed of the absolute truth in particular about the use of their increased capital contributions from the current 0.5ppl to 2ppl,” said Mr Macalpine.
“First Milk’s member businesses are being put under enormous stress with crucial decision making with banks and suppliers, both for the short and long term.
“Consequently, they need accurate information in order to make these decisions; they also need to be reassured that they will continue to have a milk buyer,” he said, urging all First Milk members to attend their delayed AGM on 30 January.
NFU President Meurig Raymond said: “I and the NFU dairy team met with First Milk the day after their announcement last Thursday. I told them that their time scales were unacceptable.
“I am also challenging them to get out and explain to their farmer suppliers what these changes are and explain how it will impact them. I know that First Milk have their AGM later this month, but the questions need answering now.”
First Milk’s behaviour comes amid a flurry of price cuts from processors trying to adjust to falling world dairy prices.
Mr Raymond said: “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."
NFU Dairy Board chairman Rob Harrison, appalled by the ongoing price cuts, likened being a dairy farmer to being a boxer.
He said he was heartened by the support of the public and that farmers could take only so much before “throwing in the towel”.