Some UK dairy farmers will see their milk cheques delayed by two weeks this month amid cash flow concerns at processor First Milk.
The company said despite aligning milk prices with market returns to balance the books since October 2014, there remains a gap of 1p/L on an annualised basis due to these earlier accrued losses, which has restricted the cash available to the business.
First Milk suppliers who usually get paid every two weeks and are due payment on January 12 will now have to wait till January 29.
NFU President Meurig Raymond the announcement was wholly unacceptable announcement from First Milk coming after last week’s announcement of a milk price cut is partly to be reversed.
“Members are now being asked to fork out an extra 1.5ppl capital investment as well as receiving a delayed payment for milk already supplied,” he said.
“It is quite clear that this announcement will be a serious burden for farmers and will be damaging to cash flow at an expensive and demanding time of year for costs. It is essential at this time that banks understand and are supportive of our farmer members so they can continue to finance their businesses.
“I will be personally contacting all the main agricultural banks to ask them to do so. It is so important at this difficult time for the dairy industry that the financial health of First Milk issecured.”
First Milk says for it and the rest of the dairy industry around the globe, 2014 was a year of volatility that has never been seen before.
It says while returns from globally traded products were at record levels 12 months ago, they have fallen over 50% since then, leading to a steep fall in milk prices around the world.
For every dairy business, this has made aligning incomings with milk price payments extremely challenging each month, the company said.
In a statement today it said at its member meetings in November, the First Milk Board was open about the losses that were accrued in the early months of this financial year as the company dealt with rapidly falling markets.
First Milk’s chairman, Sir Jim Paice MP, said while our lenders have been supportive as we’ve dealt with this 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.
“As such, the Board has therefore decided that the milk payment planned for 12th January will now be deferred until 26th January, with all future payments also being deferred by 2 weeks.”
The company hopes the measures will allow it to reverse a planned 1.1p/L milk price cut in February.