Milk price crash 'will hit farmers'
Farmers are facing a "dire situation" after the UK's largest dairy company withheld payments to them following a crash in the price of milk, a lobbyist has claimed.
First Milk, a co-operative owned by British farmers, said 2014 was a "year of volatility that has never been seen before" in the global dairy industry.
Its chairman, Conservative MP Sir Jim Paice, said it will delay today's payments to farmers by two weeks and all subsequent payments by a fortnight in order to build a "stronger business platform".
David Handley, chairman of lobby group Farmers For Action, said the move could leave many farmers facing financial difficulties.
He said: " It's a dire situation when farmers get told they've got a delay of two weeks in receiving their milk cheque, It's a pretty serious situation because within that two week period you've got to go and be able to tell your bank manager, your creditors, that there is a delay.
"Some people may be lucky enough to be financially sound enough that their bank supports that. There are many that are stretched already. Their bank manager may see this as a death knell and say sorry, we cannot support the business for another fortnight.
"There may be creditors who are owed considerable amounts of money who are in the same position. If they sit back and wait for a fortnight then maybe they could be in a very difficult position.
"I think this move by First Milk could open itself up to a legal challenge as to whether this is legally correct and can be applied in the manner it has done and with the speed it has done because at the end of the day everybody has got cash flow issues."
He added: " The last thing we want at the moment is for First Milk to go into receivership, that would bring 800 million litres of milk into the market place which is already flooded with milk. That could cause major problems and push milk prices down even further. So we've got to support but we've also got to be critical."
Mr Handley, who farms in Monmouth, South Wales, says he will be considering his own position in April and will consider an "exit policy" for his business if the situation does not look more positive by then.
He said: "I am not going to be in the bankruptcy court because of milk price."
Meurig Raymond, head of the National Farmers' Union, criticised the timing of First Milk's decision, stressing that dairy farmers are "already under huge financial pressure".
He said some farmers are now receiving just 20p per litre for milk, the lowest price since 2007, as milk becomes cheaper than mineral water in some supermarkets.
He said: "My priority is the impact of First Milk's announcement on our members and I am working to ensure we are doing all we can across the NFU to support our members at this crucial time."
He added: "What we want is an economically sustainable dairy industry for the future. As farmers face volatile markets, I'm also convinced that the Government can do more to help by ensuring its policies are sympathetic to the current situation and will help farmers and farming businesses continue forwards."
Mr Handley and Mr Raymond were among the speakers at the Semex Dairy Conference 2015 in Glasgow today.
In a statement for First Milk, Sir Jim said: "We understand that the milk payment deferral will cause concern for members as direct debits and payments will have been lined up against milk cheques.
"On that basis, we are working with all major banks at national, regional and local levels to explain the rationale around this decision. That way, bank managers should be well equipped for any conversations they have with First Milk members.
"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."
The number of dairy farmers in England and Wales has halved in the decade since 2002, dropping to just under 10,000 for the first time.
A global increase in the production of milk at the same time as a drop in demand and rising farming costs means very few dairy farmers are making a profit.