UK milk suppliers set to profit from Wiseman ruling
co-operatives, has been given permission from the Office of Fair
Trading to buy a stake in Robert Wiseman Dairies - another positive
step for UK farmers, giving them more leverage in steering the
future direction of the UK dairy industry, Tom Armitage
reports.
The 3,600-member company, which produces around 2.3 billion litres of milk per year, is to acquire a 15 per cent stake in Wiseman for a £28 million price tag, following a vote of approval at its AGM in November last year.
According to member-farmers and First Milk's directors, the move will inevitably strengthen the co-operative's position in the supply chain.
Despite pledges from the UK's major dairy processors, inlcuding Arla Foods and Robert Wiseman, to increase the farmgate milk price for March to around 20p per litre (the highest it has been for a number of months), farmers are still struggling to post a profit, particularly when faced with mounting raw material costs.
"The dairy sector at producer level continues to battle against rising costs and reduced returns, with recent reports suggest that UK dairy farmers are among the most efficient in the EU, 60 per cent are operating at or below break-even," commented John Duncan, First Milk's chief executive.
He also hit back at critics, some of whom had suggested previously that he had showed a reluctance to invest in further processing capacity: "We will only invest in the very best, most efficient businesses in the country."
At the end of last month Robert Wiseman confirmed that its annual results would be in line with analysts' expectations - operating profits are expected to be around £25.8 million (pre-goodwill) - and vowed that it would fight to retain its lucrative supply arrangements with some of the UK's major multiple retailers.
Since losing a £70 million contract to supply Asda with fresh liquid milk last year, Tesco and Sainsbury's have each upped their volume demands by around 20 and 30 per cent respectively.
"This has been a difficult year for the UK's milk processors, which have all been adversely affected by deteriorating prices and cost pressures, particularly rising plastics and energy costs," Investec analyst Nicola Mallard told DairyReporter.com.
