First Milk slashes January milk price

First Milk has cut its January milk price for a number of balancing and creamery pools –  a month after its previous cuts.

Dairy farmers supplying milk to the Campbeltown, Arran, Lake District and Haverfordwest creamery pools and the Northern England balancing pool will see their milk price drop by 0.25p/litre.

In December their milk price was cut by 0.43p/litre.

See more: Milk price misery for dairy farmers hits new depths

Those supplying the Scottish balancing pool will have their milk price cut by 0.18p/litre, a month after their milk price was cut by 0.3p/litre. There will be no change for producers feeding into the Midlands balancing pool.

The cuts take most farmers’ A milk price further below 20p/litre.

The dairy co-op, which is 100% farmer owned, said the price cuts were a result of market conditions that continued to be “extremely tough”, with a sustained oversupply of milk globally and lower returns from the cheese business.

First Milk made an operating profit of £1.1m in the six months to the end of September, compared with a loss of £7.6m in the same period in 2014.

See more: First Milk back into profit with half-year results 

It delayed payments to farmers and cut milk prices heavily following a £25m loss in the year to March 2015. 

Commenting on the January price cuts, First Milk’s interim chairman, Nigel Evans, said: “While 2015 was a hugely challenging year for First Milk and our members, the announcement that we had concluded refinancing with our current banks demonstrates the progress we have made, not only in stabilising the finances of the business, but also in reshaping the company over the past 12 months.

“However, the market backdrop remains extremely tough. Sustained oversupply of milk, especially in the EU, is driving up stock levels and putting downward pressure on prices.

“With returns for our cheese business set by a basket mechanism, announcements from other processors of price drops for January have had a direct effect on First Milk returns.”

Chief operating officer Mike Gallacher took up his post in March this year. Changes he has made so far include the introduction of A and B pricing for farmer-members’ milk and several top-level appointments in the group’s executive team.