Milk sector cheered by group’s contract offer

First Milk is owned by farmers who produce about 15 per cent of British milk. But it is offering short-term contracts to outsiders to feed a second drier, which is not always in action but is now being made ready, at Westbury Dairies, Wiltshire, which is the only existing powdering plant. First Milk is one of its owners.

The price of powder on the international commodities market has overtaken the average price of liquid milk in the UK and farmers have been accusing the big milk dealers of letting them down by not finding ways to export more.

This week, First Milk announced that it and its exporting partner, Eilers & Wheeler, saw an opportunity to do just that and would pay an opening price of 28.5 pence per litre, plus bonuses of up to 0.8 ppl for high volume, for farmers who would commit to supply them for three months. This compares with a standard price of 26.2 ppl at the moment for First Milk’s regular suppliers. After the end of June, the special short-term price will follow the ups and downs of the market in the Netherlands, where a lot of dairy commodities are traded.

First Milk chairman Bill Mustoe said: “When you boil it down, our job is to make money for members. Right now, with world market prices strong, there is a clear commercial opportunity to put some more cash in the till through getting additional milk through Westbury. Every penny of the margin we make on the international contract will go back directly to members.

“In March we set up a partnership with Eilers & Wheeler to export our cheese around the globe. We have now extended that partnership to cover the purchase of raw milk, the processing of butter and powder and sales of these products on the world market.”

The volume bonus is another 0.1 ppl for every thousand litres over 8000 a day, topping out at 0.8 ppl for 15,000 litres a day and more.

Industry analyst Ian Potter said in his newsletter last weekend: “Clearly this is a contract some larger producers will find of interest.

“The more milk Westbury processes, the tighter all markets are, and First Milk’s move to maximise the use of Westbury should benefit all.”

The First Milk move followed a threat by the ginger group Farmers For Action to set up its own powder-making plant, in the north of England. The project is still on the cards.

Farmers For Action leader, David Handley, said: “Westbury at full capacity still will not deal with the problem that we have but it will assist by taking some milk out of the UK system.

“The problem will be finding farmers willing to leave the domestic market in exchange for a very short contract.

“The difference between that and what we are proposing is that we would be offering a 365-day contract.

“But meanwhile, anything Westbury can do to soak up more milk will help the situation we have at the moment and may just perk people’s ideas up.”

A spokesman for First Milk, Paul Flanagan, said: “We are not setting out to mop up spare milk. We are responding to a commercial opportunity. But of course there will be an impact on the whole market.”

Mr Flanagan said they could trade with other collectors and were ready to do deals in all parts of the country, including Yorkshire. Call 0141 847 6800.