FIRST MILK has announced a third consecutive producer price rise, this time boosting its September cheques.

In a letter to members, chairman Clive Sharpe said: “I am pleased to report that for the third month running we will be increasing our milk price. With the market recovering and having exited our loss-making activities, returns are flowing directly through to our milk price.

"At the same time we are bringing forward the delivery of the business performance supplement, which comes from continuing improvements in our own efficiency.

“Last month we forecast a 0.5ppl increase for our manufacturing pools from September 1 – however with further advances in the market, we will actually deliver a 1ppl increase. As well as increased cheese returns, we are now starting to see price movement from some of the major liquid processors, which directly benefit our balancing pools. There will be further price lifts for October and we will confirm the level of this during September once we get a full view on market changes."

In June, First Milk introduced a 'business performance supplement' for producers, which represents money that comes from the co-op's internal buisiness improvements, such as removing loss making divisions; better commercial and quality performance; and cost-cutting.

"This supplement was at 0.75ppl and will now increase by 0.25ppl from September to 1ppl," said Mr Sharpe. "Further increases in this supplement are budgeted and will follow shortly to cover the initial 2ppl that we have committed to deliver."

Chief executive Mike Gallacher added: “While it has been pleasing to announce these milk price increases over the last few months, we recognise that they do not yet return members to sustainable prices.

"However, with future market prices for commodities forecast to be around the mid-20s, members can be confident that as the market continues to rise in line with this forecast; so will our milk price. In addition, we will continue to deliver on our BPS commitment.

“As First Milk’s performance gets back on track after a number of difficult years, we need now to give members a clearer vision for the long term future of our co-op," added Mr Gallacher. "We now have a very different and much better business and our new vision for the future will be explained at a series of member meetings planned for late September/early October. These sessions will be hugely important as we set the course for the long term.”

Commenting on the announcement, NFU Scotland’s milk policy manager George Jamieson said: “The price increase is welcome, as are the candid comments from First Milk CEO Mike Gallagher that the board accept that members need to be returned to a sustainable price.

"The new management at FM have a difficult task, but progress has been made. Members have been receiving a below average price over a sustained period – that is acknowledged – and more progress on price is essential," said Mr Jamieson.

“For all milk buyers, it is imperative that the significantly improved market conditions translate into speedy and significant shift in price. Recent AHDB Dairy figures report that, year on year, cream prices are up 37%; butter up by 71%; Skimmed Milk Powder up by 34% and cheese prices are now back at £2500 per tonne for mild cheddar and £3500 per tonne for mature.

“As First Milk’s cheese price is based on a basket of competitors’ prices, it is essential for them that the wider market responds to increased commodity prices. Spot liquid prices are also very strong and hopefully FM have spare milk to redirect if the cheese market does not respond as it should.

“We welcome the announcement that a series of meetings will be held to explain First Milk’s new business model and vision for the future," he added. "It is very important that communications are maintained and members are intrinsically involved in the co-op. We would encourage all members to attend.”