Loan incentives for organic conversion

4 August 2000

Loan incentives for organic conversion

A NEW organic milk contract which offers interest-free loans to help farmers convert and a top price once they have done so has been launched by Dairy Crest/Unigate.

The contract offers a premium, worth almost 2.3p/litre over an average price paid by major organic milk purchasers, to producers achieving top hygiene and quality bands.

That equates to almost 33p/litre, says Unigates milk director David Lattimore. Prices will vary in line with the average basket value, but the premium will be maintained.

The contract is being operated on a first come, first served basis. It was put together before the two companies joined forces, and will be offered to Unigate suppliers first. "This is limited issue," says Mr Lattimore. "We have a volume in mind which we will allow it to run up to. We may then offer a different version."

Those joining the scheme will be offered an interest-free loan of 2p/litre paid with the monthly milk cheque for a maximum of 27 months – a potential total of £22,500 for a 500,000-litre producer. It will be repayable for up to three years after organic accreditation has been achieved. "In effect, its a three-year lock-in, then farmers can give a years notice to leave," says Mr Lattimore.

Sally Bagenal, chief executive of the Organic Milk Suppliers Co-operative, which pays farmers 29.5p/litre, says such moves could damage the organic milk sector. "We are not in the numbers game. We believe we have found a fair price for all parties which is sustainable. The market is small, but growing, and needs to be nurtured."

Paying short-term high prices threatens to fragment producers, allowing buyers to play them off one against the other, as happened in the conventional sector after deregulation. "Its a very cynical move when so many farmers are strapped for cash."

See more