Was it an administrative error?

The farmer-owned dairy co-op First Milk hit yet more trouble last Friday as their milk suppliers failed to receive their monthly cheque as expected.

First Milk blame this on an administrative error but there are continued fears about the organisation’s financial stability which must be arousing fear among the 1,200 farmers who supply milk to the co-op.

Since the turn of the year First Milk has been rocked by a number of problems that started in January when they announced a delay in paying the monthly milk cheque by two weeks.

This sent shock waves through their membership. Then in February First Milk announced a change in the way farmers would be paid for their milk by introducing an “A and B pricing contract”.

Instead of paying farmers a single price for all the milk they produce, farmers from April 1 would receive a fixed price for the “A” milk; approximately 80 per cent of their produce and a second variable price for the “B” milk.

The “B” price is being set to reflect the short-term prices such as those on the spot and milk powder markets. This clearly introduces uncertainty for First Milk members who will not know what price they will be receiving for their milk at the end of the month.

Then in March First Milk announced its milk price for April would likely end up being around 20p/litre which is well below the cost of production.

This makes one wonder how long dairy farmers can continue to supply milk at this price, especially as other dairy farmers are being paid significantly more by other milk buyers.

In this context some farmers on the best contracts are still being paid more than 30p/litre, an incredible 10p per litre more than most First Milk producers are getting for doing more or less the same job.

Why don’t farmers change contracts? Well the answer is that it is not easy to change contracts and for some there will be no choice at all. Many of the beleaguered First Milk suppliers will have to hang on in hope of better prices to come or cease dairy farming altogether.

So with the milk price at around 20p per litre, First Milk producers are facing a difficult choice and their confidence in the management of the organisation will have not grown when their monthly milk cheque failed to hit their bank accounts last Friday.  

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk