Pensworth Dairy has blamed the spreading coronavirus and subsequent school closures for a decline in milk sales and has outlined its plans to pay just 25 per cent of the milk price to farmers for March and April.
In a letter sent out on March 30, managing director of Pensworth, David Kent, stated while the steps were ‘extremely unwelcome’, they were ‘necessary for the business in the current crisis.’
He said: “We are in the process of arranging a substantial funding package with our bank, supported by the government loan scheme, and we are working around the clock to bring our costs in line with our sales.
“However, at this stage and without any real immediate solution from our bankers (due to timings) we have to take the following immediate action and are writing to all our suppliers to delay payments.
“Due to these unprecedented times we are not in the position to forecast the raw milk price from May 1.
"Therefore, we will update you on the May milk price w/e April 25.”
The announcement has raised cashflow concerns from farmers and their ability to pay suppliers.
Roy Townsend, a dairy farmer from Gloucestershire, told Farmers Guardian about the ‘vulnerable position’ the decision placed his business in.
He said: “I love milking cows but I cannot get an aligned contract so have no alternative than to accept liquid milk prices.
“You have to laugh at the irony of the situation, with Pensworth placing increasing pressure on producers to sign up to Compassion in World Farming standards.
"But where is the compassion if farmers cannot afford to feed their cows due to delayed payments from the company?
“All dairy farmers are asking for is a reasonable price for their produce.”
The announcement follows similar moves from Freshways to negate the impact of Covid-19 on the processors.
Yet 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.
First Milk has announced it is holding its member milk price for May 2020, which will be 26.75ppl for a liquid standard litre and 27.63ppl on a manufacturing standard litre, both including their member premium.
Commenting on the announcement, Jim Baird, farmer director and vice-chairman, said: “The current situation is uncertain, as no-one can predict what the overall impact of COVID-19 will be on society at large, or on milk prices.
"International dairy commodity markets have weakened, and the food service sector is shutdown, yet most of our customers are focused on retail markets, which are seeing strong demand due to concerns over food availability.
"Throughout our supply chain – from farmer members to hauliers and First Milk colleagues – everyone is working tirelessly in difficult circumstances to play our part in feeding the nation and I want to thank everyone involved for all their support.”
“We are well-placed and will continue to do all we can to minimise the risk to future returns for our members in these challenging times.”