United Milk attempts to woo farmers

By FWi staff

UNITED MILK has unveiled a range of incentives in an attempt to persuade dairy farmers to invest in a new processing plant for Southern England.

The company is offering a guaranteed premium price for milk, “evergreen” supply contracts which it cannot terminate, additional bonuses and dividends.

It aims to raise about 20 million from farmers, just under half of the anticipated 40-45m cost needed to fund the first phase of setting up the factory.

Richard Ashworth, chairman of United Milk, said banks and finance companies would fund the remaining 20-25m if the initial 20m was raised.

“Our plans require courage, vision and fresh thinking. But they offer the most prized solution to the current financial difficulties facing UK dairy farmers.”

United Milk anticipates that its 800m litres a year factory will be operational by the fourth quarter of 2001 on a 30-acre greenfield site in southern England.

It will initially produce top quality commodity products like butter, cream and milk powders. Other true value-added products and liquid milk will follow.

This will ensure the quickest return, since commodity markets provide an accessible and substantial market, said Don Morris, United Milk chief executive.

It will allow United Milk to pay producers a premium price of 1.3p above the intervention milk price, equivalent to about 17.58ppl at current exchange rates.

To qualify, farmers will have to purchase shares in proportion to anticipated milk output. Each ordinary share equates to 44 litres of milk.

Typical farmers producing 1m litres a year would need to buy just under 23,000 shares, costing 20,000 after tax relief, to join the scheme.

Those farmers choosing not to purchase enough shares to cover all their production will still be able to supply the plant.

But United Milk will pay 0.5ppl below the Intervention Milk Price Equivalent for the proportion of milk not covered.

• United Milk into processing – in a big way, FWi, 16 August, 1999
• Members thumbs-up to United Milk, FWi, 29 March, 1999