First Milk Posts Huge Losses Due to Dairy Price Collapse

There was more bad news in the dairy sector this week as UK dairy co-operative First Milk posted losses of £24.9 million.

First Milk said that as the dairy market declined, prices paid to its members were “not aligned with the returns being generated by the business."

First Milk said the difficult financial situation was exacerbated by the termination of a contract at short notice in March 2014, leading to an over-supply of milk processed into products. Other issues faced by the company included the value of cheese sales, a breakdown at its whey processing facility, and a lower performance of its sports nutrition business than expected.

"There remains considerable volatility in the returns generated from globally traded dairy commodities and we will continue to adjust the amount paid for milk supplies to reflect these returns," the company’s annual report said – read more.

The UK’s Dairy Crest also announced a price hold for its standard milk suppliers and a price cut of 0.6ppl for its Davidstow milk suppliers.

Ruth Askew, Head of Procurement at Dairy Crest, commented: “In order for our cheese business to remain competitive, we have had to adjust the December milk price for our Davidstow contract.

Whilst I realise this will be extremely disappointing news to farmers, Dairy Crest has tried to bring as much stability as possible by introducing a milk price floor until the end of February 2016.”

The NFU said that UK retailers need to take another look at their cheese sourcing policies to ensure they are paying a fair price – read more (and find out more about supermarket-supplier relations here).

A summit led by the Prince of Wales last week aimed to find ways to make life easier for farmers in these difficult times. The key message of the summit was to raise awareness of the ‘help at hand’ for farmers, such as from farming charities - read more here.