Milk Link price cut shock

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MILK LINK has shocked its members by cutting milk cheques from March despite the announcement this week of a price rise.

The dairy co-op’s board said the recent retail price increases for fresh milk meant it could pay an extra 0.3p/litre for milk from April.

But, at the same time, it said higher debt-servicing obligations meant the member capital account contribution would have to rise 0.25p/litre to 1p/litre from April.

A board statement said borrowing costs on £100m would be at their height over the next two years, after the co-op bought Glanbia’s cheese business.

Group finance manager Nairn Glen said: “This is painful, but we are totally committed to ensuring Milk Link has an outlet for its milk.

“Quite clearly and sadly there are some people who won‘t be able to survive.”

In addition, members have been asked to contribute a further 0.12p/litre for milk delivered from last month to Feb 28, 2006.

The co-op said it had to recover a £1.8m shortfall in expected pre-tax profits for the year ended Mar 31, 2005, after higher costs, increased milk payments and a shortfall in milk volumes.

Members already struggling with one of the industry’s lowest prices will effectively face a deduction of 0.12p/litre for March milk and 0.07p/litre in April.

A Milk Link spokesman said it had already had a constructive meeting with members, and they understood why the extra contributions were necessary.

But James Bowditch, whose family farm milks over 400 cows in Dorset, said he was thinking of leaving. “This defies belief and I am very worried.”

Another member, Steve Wall from Somerset, said he might switch buyers. “We knew there would be pain, but not this much. People are already on the limit.”

John Allen of Kite Consulting said he was very concerned. “The price Milk Link is delivering is not sustainable. The people running it need to realise that.”