Troubled milk buyer Longslow Food Group has rejected suggestions it is about to enter administration after the closure of its factory at Mochdre, North Wales, last week.

At close of business on Friday the firm owed 55 direct milk suppliers 1.3m, but assured farmers they would be paid in full by 18 January next year.

Managing director Philip Crewe said the loss of the company’s contract with retail chain Spar at three month’s notice in August would cut throughput by 8m litres.

“We looked for alternative business, but with Dairy Crest, Robert Wiseman Dairies and Dairy Farmers of Britain also aiming for middle-ground liquid milk markets, we have decided to become a milk wholesaler.”

Mr Crewe wrote to farmers last week, informing them that they would be paid in full in four monthly instalments and Longslow would pay 6% interest on late payments.

He also said Meadow Foods would buy and collect all Longslow milk, and was offering dairy farmers its own milk contract.

Eldon Thomas, who milks 160 Holsteins at Gloddaeth Isa, near Llandudno, said Meadow Foods’ was a constituent contract, and unsuitable to replace Longslow’s liquid milk agreement.

“Having entered into a liquid contract with Longslow, we have spent 10 months pushing yields.”

Mr Thomas said he would now supply Glanbia.

“It’s a hard pill to swallow and we will only get half of what we are owed for two months.

If the firm does go into administration we could lose everything.”

But Mr Crewe insisted the group would be able to satisfy creditors.

“We have the support of our bank and will restructure as a wholesaler.”

The closure of Longslow’s Manchester distribution centre was averted in an 11th hour deal with Robert Wiseman Dairies.

Longslow Food Group retains sites at Shrewsbury, Tenbury Wells, Anglesey and Llandudno Junction.