Co-op chief executive Shelagh Hancock said: “These changes are the result of a thorough review into the way we pay members for their milk.
“We have ensured that our schedules deliver the best outcome based on First Milk being a vastly different business than it was two years ago. I am well aware that, as well as better structured pricing schedules, our members also want First Milk to consistently deliver a competitive milk price,” said Ms Hancock. “Right now the market signals are positive and we expect to announce a price rise for August.
“Our members can be confident that the pricing mechanisms we have in place ensure that we will continue to track the market price movements and will be reflected directly in our milk price as quickly as possible. Having conducted my own thorough review of the business, I am also confident that we can make further productivity gains and enhance our customer relationships, which will drive additional benefit to members over the coming months.”
According to Ms Hancock, the co-op needs more milk to meet its customer demand, so another change is the introduction of a 0.5p production bonus paid on all litres if the amount produced on one month is equal or greater to the corresponding month 12 months earlier. Individual transport/haulage charges will also be removed from September 1.
NFU Scotland’s milk committee chairman James Rankin, a First Milk producer who farms at Badenheath, Cumbernauld, told The Scottish Farmer: “The change will suit a considerable number of co-op members but maybe not all. A number found the A and B system worked well with regard to supply management.
“While the outlook on the price front is much brighter than it was at the start of the year, we have to be careful with regard to the amount of milk we produce or we could end up shooting ourselves in the foot.
“If milk is so scarce is that why the processors are making such big increases so fast?” he asked. “Members should perhaps heed the motto of the town just down the road from where I farm, Kirkintilloch, which reads ‘ca canny but ca awa’.
“If any member has a concern over the changes, they can pick up the phone and give me a call,” added Mr Rankin.
Dairy industry analyst Ian Potter said: “While some farmers will understandably criticise the move on the basis that B pricing should now be very high, it has to be balanced by the fact that First Milk’s B price for July is only 25p and off the pace.
“The reason for this appears to be that First Milk don’t have any surplus milk with all their member’s milk required for their core business contracts. In fact when questioned, First Milk claim that they are now buying milk from third parties for short term opportunities, far more often than they are selling surplus.”
First Milk’s milk supply and communications director Paul Flanagan responded: “We are now broadly in balance with supply and demand, having moved away from a surplus milk situation that led to the creation of A and B pricing in 2015.
“We do have demand for more milk from existing and new customers and hopefully these changes will provide an incentive for members to supply us with additional milk to meet that demand.”
Source: The Scottish Farmer