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All First Milk members deal with our Milk Operations division on a daily, or every other day, basis. Milk Operations are the people that collect, distribute, and sell your milk – so it’s a very important part of the business.

The team co-ordinate our third party hauliers who pick-up around five million litres a day from 2600 farmers in over 100 tankers across thousands of square miles of England, Scotland and Wales.

From a milk sales point of view, the team has certainly had a hectic few months, indeed few can recall such a turnaround in the marketplace in such a short space of time. If someone had bet a year ago that powder prices would be significantly ahead of liquid prices and driving the market, Mr. Ladbrokes would have given you fairly long odds!

Milk Operations Director Mark McQuade commented: “While many are now claiming that they foresaw the changes, the fact is that no-one in the global dairy market predicted the combination of events, and the impact that this would have on farm gate milk prices in the UK. Indeed only twelve months ago, we had senior executives at some of the plc’s debating how many billion litres of milk the UK dairy industry would have to lose before we saw milk prices rise!

In terms of allocating supplies of raw milk, our preferred way of working with customers is to build mutually beneficial long-term partnerships. (editors note: see interview with Robert Wiseman elsewhere in this newsletter). In relation to our larger customers, we have long-term contracts in place with Wiseman Dairies, Dairy Crest and Nestlé, and a contract nearing its end with Lactalis. “We have flexibility within our contracts to renegotiate price on a regular basis,” explained Mark.

This year, as you will be aware through previous articles in this newsletter, we experienced a marked reduction in milk volumes from our members. With production more than 5% below that of our original budgeted forecast, we have been unable to honour our original contractual commitments and were left with no option other than to call Force Majeure on milk supplies for the month of August. This situation has continued since August and we have been working closely with customers to mitigate this problem as much as possible.

First Milk has played a lead role in driving prices upwards in the last few months, explained Mark. “We have had some very difficult discussions with customers but we needed to have these. Our members deserve a sustainable and profitable milk price that reflects market conditions, and costs being incurred on their farm. Right now, there is no reason why any of our customers should not pay a competitive market rate, plus distribution costs, for the milk we supply to them.”

Mark states that most of First Milk’s customers have “played ball” on price rises, although for the minority who have not, there is a clear process in place within the contracts if we cannot reach an agreement.

He continued: “We want to work with customers that have the same objectives as us. Critically, this includes a desire to pay a sustainable price that delivers a long-term future for dairy farmers in this country. In the medium term, I firmly believe that First Milk members will benefit because of the flexibility of the markets we supply with raw milk – and our flexibility and agility is likely to be the difference between being leaders and follower in the marketplace.”