17 May 2002

Amelca offers milk premium to its suppliers

By Robert Harris

DAIRY producers supplying the new farmer-backed Amelca milk and cheese factory in Derbyshire can expect to receive a premium price for their milk by next autumn.

Speaking a few days ahead of the official opening of the newly completed £19m, 50,000sq ft dairy plant at Dove Valley Park, Foston, managing director Len Jackson told farmers weekly that suppliers would receive a 1p/litre premium over the local average paid by several processors. "We will definitely be paying this by October; earlier if possible."

That is welcome news to the many suppliers who resigned their contracts with rival firms so they could supply the factory as soon as it opened. They have had to cope with poor spot milk prices in the past few months. Others chose to renew contracts with other companies to help protect their milk price.

"Eighteen months ago, we said as long as we were unable to process milk we would get farmers a decent spot price. For the past four years, that would have been true," said Mr Jackson. "We have all seen what has happened to spot prices recently. But farmers have been very supportive and keen to make the project work."

Amelca can afford to pay a premium price for several reasons, says Mr Jackson. The factorys tight milk field – all farmers are within 25 miles of the site – minimises collection costs. The plant can also switch production between liquid milk and cheese to cope with seasonal milk production and market demands. Milk is also destined for local homes. Middle-ground retailers – local stores, garage forecourts – are the main target, though the company is also talking to major multiples who intend to buy more local produce.

Amelca also claims traceability that is second to none. "Food safety has become a real issue with consumers," said Mr Jackson. "The total traceability we offer meets the needs of todays marketplace."

About half the 150 farmer-shareholders will supply the factory by Oct 1, and the remainder will start during 2003 when they are released from existing contracts. The cheese plant, due to open in July, will require 1m litres of milk/week, and the rest will go to the liquid milk market.

The factory will process 150m litres of milk in the year from August, rising to 200m litres annually. Full production of 300m litres/year should be reached in 2006.

The plant has been financed by shareholders and the Bank of Scotland. About £1m of equity was provided by farmer founders and their associates, and a further £6.6m through a subscription offer made in Nov 2000 (with farmers supplying £3m). The bank loaned £11.55m.

DEFRA secretary Margaret Beckett will open the new plant on Mon, May 20, three years after the idea was first mooted. "The original idea came from a small group of farmers who wanted to improve both the industry and their own lot by investing in modern milk processing," said Mr Jackson.

"What we have achieved is a fine example of vertical integration – Amelca will supply a top-quality product for the consumer and return a premium price to our farmer suppliers." &#42

&#8226 Nov 2000 – Subscription offer launched.

&#8226 March 2001 – Funding achieved and shares introduced to OFEX market.

&#8226 June 2001 – Nine-acre site at Dove Valley Park, Derbys, purchased.

&#8226 April 2002 – liquid processing plant commissioned.

&#8226 May 2002 – Official opening – milk deliveries commence.

&#8226 June 2002 -Site work completed.

&#8226 July 2002 – Cheese production to start.

Amelcas new milk and cheese factory will be supplied by 150 local farmers who can expect a premium price.