Dairy farmers stunned by First Milk price cut

First Milk, the country’s largest dairy co-op, has announced a cut in its milk price to members of 0.65p/litre for November deliveries.

The move, which comes despite recent improvements in a number of commodity markets, takes the First Milk standard price to just 21.4p/litre – one of the lowest in the country.

Chief execuitve Peter Humphreys said the main reason was continuing difficulties in the cheese market. “These prices are under pressure primarily due to the level of imports into the UK, plus the high level of promotional activity by the major retailers,” he said.

This is borne out by recent figures from DairyCo, which show that, in the wholesale market, mild and mature Cheddar were the only two products to remain flat between September and October at £2500/t and £2950/t respectively.

First Milk also points to the fact that many other cheese manufacturers cut their prices last month, by up to 1.5p/litre. “We are not alone in facing these challenges,” said Mr Humphreys .

The company admits there are also “positive signals” coming through from the marketplace.

For example, new DairyCo figures show that cream prices have risen by £350/t in the past month to £1700/t – the highest they have been since DairyCo records began in 2000. And, while there was no change in the retail price of liquid milk between September and October, overall the GB market has grown by 8% to £3.5bn on a 12-month rolling basis.

The Actual Milk Price Equivalent for butter and powder is also up by 3.4p to 26.4p/litre in October.

“However, until these signals translate into hard cash, we can only pay out to members what we’re receiving,” said Mr Humphreys. “I appreciate that our members will be very disappointed by this news.”

NFU Scotland said it was “stunned and dismayed” by the announcement, pointing to the “significantly better prices for milk and dairy products” and the slowdown in imports of cheap Cheddar. “While most milk purchasers continue to dither, this First Milk announcement of a price cut comes as a real blow,” said president Jim McLaren.

News of the price cut came the day before First Milk’s annual general meeting (29 October) where new chairman Bill Mustoe takes over from the retiring Richard Greenhalgh.

Last month First Milk announced annual results for the year to 31 March, which revealed a £7m loss on sales of £582m. This was partly due to restructuring costs, but management said “the balance sheet remained strong”.

 Meanwhile, milk prices in Northern Ireland have jumped for the fourth month in a row, with the monthly auction by United Dairy Farmers achieving a return of 28.3p/litre, a rise of 18%, in response to stronger global markets and the weakness of sterling

“This improvement should allow dairy farmers to at last start seeing some profitable return for their efforts,” said UFU dairy chairman William Cromie.

United Dairy Farmers recently announced a 2p/litre rise in its farmgate price to 20.84p/litre.

* For a comment on First Milk’s price cut, see Phil Clarke’s Business Blog

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