Attending the launch of the Dairy All-Party Parliamentary Group’s report, The sustainable competitiveness of the UK dairy industry, Paice told FoodManufacture.co.uk: “We have re-established First Milk’s finances and are determined to move forward.
“We have seen a reduction in losses in parts of the business that have been losing money for some time.”
Increasing the capital contribution of the co-operative’s farmer members and deferring payments by two weeks had helped in this process, he said.
Challenge
However, he recognised there were areas of the business that presented more of a challenge than others, for example, its Westbury Dairies joint venture with Arla Foods. The facility processes up to 2M litres of milk daily for skimmed milk powder, cream and butter. “Nobody has been making money out of turning milk into powder in the past 12 months,” said Paice.
At the same time, though, Westbury had supported the industry by taking up the slack from liquid milk production, he said. “The industry should recognise that if we hadn’t got Westbury to take up production, god knows what we would have done last year.”
He acknowledged that First Milk still had to address areas of the business that were underperforming, but said avenues such as exports still offered a lot of potential.
“We are working closely with the Scottish government on their export strategy – we have fine cheeses we make up in Campbeltown,” he said.
Pricing model
Earlier this week, First Milk announced a two-tier, A & B milk price arrangement for April. Under the terms of the pricing model, the A price would offer 20.87 pence per litre (ppl) for its manufacturing pool (A) and 20.5ppl for its balancing pool.
The B price range would be 16-18ppl, which would be fixed after the month end and would be paid on at least 20% of a member’s total volume.
However, Rob Harrison, dairy board chairman at the National Farmers Union, called the move “a price cut masquerading as a new pricing model”.
“This model desperately needs more transparency in the calculations. As a co-operative, First Milk members need to understand why they are facing yet another price cut,” added Harrison.
‘Honest and transparent’
“With other milk buyers also looking to implement these pricing models from April we would urge them to be honest and transparent with their suppliers as to how the A and B milk price is calculated. The signals are there that the market is starting to stabilise and we want to see this confirmed in UK farmgate milk prices.”
Commenting on the move, Paice, MP for South East Cambridgeshire, said at the time it was announced that the trend for future milk prices was starting to look more positive.
“However, there remain a number of uncertainties,” he said. “For example, although the latest few GDT [Global Dairy trade] figures have been encouraging, as yet, they have not fed through to milk prices and many buyers are awaiting the outcome of the forthcoming spring flush.
“As a board we will continue to monitor market indicators closely and build these into our decision-making on milk price.”
First Milk announced today (February 9) that it was close to finding a replacement for ceo Kate Allum, who indicated late last year that she wanted to step down from her role.
First Milk is organising UK-wide drop-in days with its Farm Enterprise Team to allow its members to discuss and understand the new pricing arrangements.