First Milk has told its customers it will not be able to fulfil its supply obligations for August after milk volumes supplied from its members continued to decline.

Production for August was estimated to be 5% below the dairy co-op’s original forecast, which the processor blamed on spiralling farm input costs and bad weather.

‘Force majeure’

As a result it said it had “no option” than to invoke a ‘force majeure’ on milk supplies for August, a clause which removes liability if a company is prevented beyond its control from fulfilling a contract.

Peter Humphreys, First Milk chief executive of First Milk, said the dairy had been receiving reduced milk volumes from its members for some time.

‘Difficult situation’

“While we have worked our way through this difficult situation over the past few months to supply our customers, we are unable to manage this situation any longer within our current volumes.

“We have informed our customers of this move and committed to speaking with them in more detail over the next few days to advise on the impact that this will have on their raw milk supplies.”

No sign of improvement

Mr Humphreys said with milk production levels showing no sign of improving, the situation could continue beyond August.

“However, as we progress through this difficult period we will keep our customers informed of developments and our plans for future months.”

The move comes after First Milk suspended its policy of withholding payment to members on over-quota milk for the remainder of the current quota year.