Stating ‘unprecedented commercial and financial pressures’ as a direct consequence of Covid-19 Medina Dairy has outlined plans to drop the milk price by 2ppl from May 1 and delay payments from April 13.
The announcement followed recent decisions by Freshways and Pensworth, who also announced milk price reductions and delayed payments, to negate the impact of the spreading virus on their businesses.
Farmers were informed of Medina’s ‘regrettable’ decision to change milk payments via a letter, seen by FG and sent out on April 3, which stated the erosion of ‘revenue from the core food services and wholesale market sectors’ as the contributing factor.
Sheazad Hussain, chief executive of Medina Dairy, said: “As a result of the coronavirus lockdown, Medina Dairy’s overall sales have decreased significantly and our ability to deal with this, both operationally and commercially, is very restricted.
“As such, having taken all of this into consideration, it is with great regret we have had to take a number of difficult but essential steps to stabilise the business.
“These include the reduction in our May milk price and change to the timing of our payments to farmers.
"While at the same time we are working to rapidly take out costs; reconfigure our food service operations and looking for ways to address the cash flow issues that the shock to the market and wider economy is causing.
“We, and we believe other dairy processors, are also speaking to Defra to try and get support from Government but so far this has not been forthcoming.”
This week has also seen the UK spot markets drop to 15ppl, while some milk is going unsold and starting to be dumped, and Farmers Guardian understands various milk processors are in the process of seeking Government aid during this unprecedented time.
Paul Tompkins, a dairy farmer from the North East, branded the milk spot price reduction as ‘unsustainable and intolerable’ and said it was the first ‘real industry indication that there is significant disruption in the market place, and should act as a clear warning that the sector must not ignore.’
However, Muller has recorded an increase in demand, and raised it prices accordingly which has called into question the fairness of supply chains and processor contracts.
Gary Mitchell, NFU Scotland Milk Chairman, said: “The next couple of months are going to be a challenge, but this increase from Muller is positive news for their producers.
“Muller Direct farmers need to be paid a sustainable price and this is a positive first step in right direction in securing long term supply of such a vital ingredient to our daily diet. It is hoped that the whole supply chain appreciates the role of all the dairy farmers in Scotland and that this is demonstrated in both the short and long term, as we continue to see demand for dairy products.
“Costs on farm continue to rise and this is in addition to the uncertainty we are all experiencing for the coming months. It is clear for all to see that Scotland’s dairy farmers are resilient, and you can be assured that NFUS are doing everything we can in discussions with key stakeholders to help at this this time.