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MP gets the cream in a dairy disaster
The price of milk, Issue 1384
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PAICE OF CHANGE: Sir Jim Paice, chair of the co-operative that has delayed milk payments to farmers... and from February will reduce what it pays them per litre
WORKING a proposed “day a week” chairing the First Milk farmers’ co-operative for an annual salary of £125,000 must have felt like money for old rope to Sir Jim Paice, Tory MP for South East Cambridgeshire, when he took the job in October 2013.

Given the co-operative’s announcement that it has severe “cash flow issues” and has had to delay payments to farmers, he might now feel obliged to put in a few extra hours.

Paice, a former coalition farms minister (with a background in farm management), was criticised for taking the First Milk role while still serving as an MP. Despite having no obvious experience running a large and complex commercial dairy operation, he was nevertheless warmly received by the co-operative’s 1,300 dairy farmer owner-members: "Sir Jim” had been a hard working minister at the Department for Environment and Rural Affairs (Defra) in his two years in government.

Goodwill evaporated
Any initial goodwill has evaporated now, however. Earlier this month Paice announced that the Glasgow-based firm would “defer” (ie delay) payment to farmers for their milk by two weeks. It will also help itself to 1.5 pence per litre from farmers’ milk cheques, deducting the money to add to its “capital investment” in the co-operative.

While these measures will ease the cash crisis at the co-operative by £20m, they will greatly increase the intense financial difficulties of its dairy farmers, who mostly farm in Scotland, Wales and the north-west of England, adding insult to injury.

Since Paice became chairman, the co-op has consistently been near the bottom of the league for the amount it pays milk suppliers. Margins in this farm sector are so tight that just 1p a litre can be the difference between a farmer making a profit or a loss. And from February, First Milk intends to cut what it pays its members to an average 21.4 pence per litre of milk – a staggering 10p per litre less than even a hard bitten commercial outfit like Tesco pays the farmers who supply its milk.

Mass exodus
The troubles at First Milk are believed to stem from its involvement in the manufacture of cheese and powdered milk, both of which have fallen severely in value as global supply has exceeded demand in recent months. As recently as last September, however, First Milk’s chief executive Kate Allum was reassuring farmers that the co-operative’s marketing strategy was “absolutely right”.

The immediate problem now for First Milk is to prevent a mass exodus of farmers who either decide to throw in the production towel altogether or try to find another outlet for their milk. Of his own salary Paice has said: "I’m not going to deny that I’m being paid very reasonably.” If only his 1,300 dairy farmer members could say the same.

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