Scotland’s largest independent dairy company, Graham’s The Family Dairy, has come under fire over plans to pay farmers 7p a litre for a proportion of their milk.
In February the Bridge of Allan-based firm introduced an AB pricing mechanism whereby farmers are paid one price for 90% of the volume of milk they produced last year and another price for any milk produced on top of that.
Graham’s has now announced a 1.5p cut to its A price bringing it to 23.75p a litre and a 7p a litre cut to its B price making it 7p a litre. The new prices will come into effect on August 1.
NFU Scotland warned the price cut would leave many of the company’s 100 dairy farmer suppliers questioning their future in the industry.
Chairman of the union’s milk committee, Graeme Kilpatrick, said: “Milk producers who supply Graham’s have been left angered by the way this latest price cut has been communicated. Many have invested greatly in their businesses over four to five years, but will now be left seriously considering their options.”
However, Graham’s defended the move and said it was needed to discourage producers from producing too much milk.
Chairman Robert Graham said the company was having to process an extra 1.3million litres of milk a month at the moment.
This was being sold at a loss of between 5 and 7p a litre or £65,000 and £91,000 a month.
“What do we do with this extra milk?” said Mr Graham. “We would rather if the farmer left it in the tank. We want people to put some of the cows dry a little bit sooner and to cull any lame cattle. It’s a chance to tidy things up.”
Mr Kilpatrick added: “These are unprecedented times for Scottish dairy farmers. There are tough decisions having to be made on a great number of farms and it is worth taking the time to consult with bank managers, accountants and farm advisers about any recent milk price drops which may lead to cash flow difficulties and impair short to mid-term business stability.”