UK Dairy Market Crisis Continues With Payment Deferral

12 Jan 2015 --- Dairy farmers continue to feel the pressure this morning as one of the country’s largest dairy co-operatives, First Milk, announces that it will not be able to pay its members for two weeks due to cash-flow problems. All subsequent payments will also be delayed by two weeks.

The organisation, which has more than 1,000 members, has said that it is acutely aware of the financial difficulties this move may cause its members and will be ready to help any member who misses payments for which it relies on this money.

The UK dairy market is in crisis due to the low prices that supermarkets are selling milk for in their supermarket wars, as well as global issues such as the Russian import ban and falling demand in key markets such as China. The situation is leading to many dairies receiving less for the milk than they produce it for and overproduction.

First Milk’s Chairman, Sir Jim Paice MP justified the move last Thursday, saying, “While our lenders have been supportive as we’ve dealt with [market] volatility, with the added uncertainty of the imminent EU quota removal, the Board has taken the decision to re-build the fundamentals of the business ahead of the Spring flush.

“These moves will deliver a cash injection into the business and play an integral role in putting our finances and our business on a stronger platform.

“We are a business owned by dairy farmers. The Board are acutely aware of the difficulties this current extreme volatility is causing First Milk members and the UK dairy industry. We don't know how long this current market downturn will last, and we are aware that hundreds of UK dairy farmers are unlikely to find a home for their milk this spring. Our priority is to make the business and our processing assets as secure as possible in order that we can continue to process and market every litre of our members' milk.”

In December First Milk announced that it would reduce its standard litre liquid price by 1 pence to 21.7 pence a litre and its manufacturing price by 1.1 pence to 22.9 pence per litre this month. This followed a 1.4 pence liquid and 1.8 pence manufacturing cut on the December milk price.

This all puts the dairy farmers under even more pressure to survive. There are currently under 10,000 milk producers in the UK, the lowest ever; reports suggest that some 60 dairies closed their doors in December alone.