First Milk restructures its contracts

Leading dairy co-operative First Milk has announced a significant restructuring of its milk pricing schedule, taking what it describes as its “first step towards market-related pricing”.

The move follows a consultation with members which kicked off last summer, and will create winners and losers as the funds are retargeted according to end use.

Producers supplying the liquid market by primary haulage will see a 0.8p/litre increase in their milk cheques from 1 April, taking the existing standard litre up to 22.45p/litre.

Just over 50% of First Milk’s 2600 members supply this outlet and, for a 1m litre producer, it will mean an additional income of £8000 a year.

Co-op members supplying the regional pools – namely those in south-west Scotland, Northumberland and along the Cumbria M6 corridor – will also benefit, with a 0.5p/litre increase to reflect the better returns for milk in those areas.

But producers in the so-called cheese and balancing pools – supplying the co-op’s Lake District and Haverfordwest creameries, in balancing milk fields or supplying the liquid market where significant secondary haulage is used – will continue to receive the same standard litre price of 21.65p/litre.

And dairy farmers in the Highlands and Islands supplying First Milk’s Scottish creameries will suffer a price cut of 0.35p/litre from 1 April, though they will still benefit from a special premium, which the company says will ensure they get a similar price to farmers supplying liquid milk in central Scotland.

First Milk chairman Bill Mustoe said that the “vast majority of members are supportive of our efforts to directly link market returns back to their milk price”. “This is the first step down that road.”

Communications director Paul Flanagan told Farmers Weekly that the move would provide more transparency to members. “Given the current marketplace, we have to reflect returns according to what the milk is used for.”

He denied that moving away from a standard price for all was abandoning the co-operative principle, insisting that most members welcomed the change.

But the price cut for farmers in the Highlands and Islands will come as a double blow for the 14 dairy farmers on the Isle of Bute, following last week’s announcement by First Milk that it plans to close their loss-making Rothesay creamery.