On Monday this week, my company First Milk received blanket coverage from the national media. From TalkSport to Sky News, from the Financial Times to phone-ins on Radio 2, we received more coverage than any other dairy industry story I can recall.
We were not talking about an acquisition or the launch of a new product. We had announced that we would pay the farmers who own our business and supply us with milk a fortnight later than planned. This move significantly improves our cashflow, which was negatively affected by falling dairy market prices throughout 2014.
On top of this, we have increased members’ capital investments into the business for a period of time to ensure that our financial position will improve further over coming months.
We have spent the last few days speaking to our farmer members. We’ve used a range of channels, including producing a video for our YouTube channel, and set up a series of farmer meetings across the country. We have also been working with a range of stakeholders including banks, farming unions and administrations in all parts of the UK.
It’s been gratifying to receive the full support of major customers such as Nestlé, Adams Foods and Fonterra. They understand our situation; they understand the actions we have taken are positive steps, and they are standing shoulder to shoulder with us as we work through things.
While stories in the farming media have mainly been about the decisions we have made, the national media and consumers have approached this story very differently.
National broadcast and print media used our news as the hook, but every piece focused mainly on the wider challenges for the global and UK dairy industries.
Without doubt, 2014 was a year of volatility the dairy industry has never seen before. While returns from many globally traded dairy products were at record levels 12 months ago, they have fallen more than 50% since then, leading to a steep fall in milk prices paid to farmers around the world.
For every dairy business, this has made aligning incomings with milk price payments extremely challenging each month, and our recent announcement is a symptom of this.
The reasons for falling market returns are well documented. While milk production in the UK and key milk producing regions such as New Zealand and the US are well up year on year, demand from main importing markets has dropped back, and on top of that Russia has banned dairy imports from the EU.
Balanced against that, there are a whole lot of positives about dairy: 98% of people on this island regularly eat or drink dairy products, and in most parts of the world dairy is viewed as nature’s perfect food. This is all particularly relevant as our national media debate why milk is cheaper than water.
Some dairy market signals over the past month have been more positive, and prices will inevitably rise again as part of the demand/supply cycle.
In the meantime, we will continue to add value to our farmers’ milk and produce nutritious added-value dairy foods.
Kate Allum is CEO of First Milk
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