Payments to dairy co-op members to ‘overtake direct suppliers’

Dairy co-op members should soon start to receive the same amount of money for their milk as direct suppliers and could even overtake them, according to the chief executive of First Milk .

Peter Humphreys said his “very short-term target” was to pay the co-op’s 2800 members at least 25p/litre with more to come by the end of the year.

Prices here to stay

Mr Humphreys said how much this would be depended on what happened to world markets for skimmed milk powder and butter going into 2008. But he was “very optimistic” higher milk prices were here to stay for at least three or four more years.

The upbeat message follows the release of a report commissioned from dairy consultant Promar International by First Milk.

The study looked at the worldwide market for milk products and the implications for UK farmers.

Higher demand

It said the world market was being driven higher by demand from developing countries for dairy products, in particular skimmed milk powder.

This was happening at the same time as production in key milk producing areas, like the US, the EU and New Zealand,  was being constrained by environmental factors and industry restructuring.

Mr Humphreys said there was a limit to how much people in developing countries could afford to pay for milk and the industry would have to react to cope with that.

‘Ideally placed’

However, he predicted prices were unlikely to fall back to the levels seen prior to the recent rises.

Until this year, butter and SMP were considered commodities that pulled the rest of the market down. Now, however, they were products producers want to put milk into, said Mr Humphreys.

He said co-ops were ideally placed to take advantage of this new market because they manufactured a wide mix of products.

Consolidate

“One of the benefits we have is flexibility and we are also joint owners of Westbury (a skimmed milk and butter plant).”

Now could be the time for the processing industry to consolidate, said Mr Humphreys.

However, he refused to say whether he thought this might mean the UK’s three large dairy co-ops merging into two, as some commentators have suggested, or First Milk increasing its 15% stake in Robert Wiseman Dairies.

Reinvestment

“We’ve got lots of ideas but nothing to reveal today,” he said.

Higher milk prices would also allow farmers to put some much-needed reinvestment back into their businesses and possibly stem the exodus from the industry, Mr Humphreys said.

But he conceded that sharp increases in costs, especially feed, could eat up much of the extra money.