First Milk has announced that it will increase its September milk prices by up to 1.25ppl.
In a letter to members today, chairman Clive Sharpe said:
"I am pleased to report that for the third month running we will be increasing our milk price. With the market recovering and having exited our loss making activities, returns are flowing directly through to our milk price. At the same time we are bringing forward the delivery of the business performance supplement, which comes from continuing improvements in our own efficiency.
"Last month we forecast a 0.5ppl increase for our manufacturing pools from 1st September, however with further advances in the market we will actually deliver a 1ppl increase. As well as increased cheese returns, we are now starting to see price movement from some of the major liquid processors, which directly benefit our balancing pools. There will be further price lifts for October and we will confirm the level of this during September once we get a full view on market changes.
"In June we introduced a Business Performance Supplement. This is the money that comes not from market changes - which now flows through directly - but from our own planned improvements such as removing loss making divisions; improving our commercial and quality performance; and cutting our costs. This supplement was at 0.75ppl and will now increase by 0.25ppl from September to 1ppl. Further increases in this supplement are budgeted and will follow shortly to cover the initial 2ppl that we have committed to deliver."
Chief executive Mike Gallacher added,
"While it has been pleasing to announce these milk price increases over the last few months, we recognise that they do not yet return members to sustainable prices. However, with future market prices for commodities forecast to be around the mid-20s, members can be confident that as the market continues to rise in line with this forecast; so will our milk price. In addition, we will continue to deliver on our Business Performance Supplement commitment.
"As First Milk's performance gets back on track after a number of difficult years, we need now to give members a clearer vision for the long term future of our co-op. We now have a very different and much better business and our new vision for the future will be explained at a series of member meetings planned for late September/early October. These sessions will be hugely important as we set the course for the long term."