A MOVE by First Milk to close a loophole in its supply contracts has highlighted the dilemma facing 11 dairy producers on Bute, who have tendered their resignations to the co-op in a bid to take advantage of the better prices currently on offer through southern buyers harnessing the sky-high spot market for milk.
Under the FM cancellation terms, departing producers must serve a year's notice before shifting to a new buyer – but some have allegedly sought to exploit a loophole which terminates their contract immediately if the business is transferred into another name.
Acting to stem this exodus, FM chairman Clive Sharpe this week emailed every co-op member notifying them of a change in their contract: "Any member who attempts to avoid their supply obligations to First Milk, by transferring their farm business at short notice, risks damaging the collective interests of other members," said Mr Sharpe. 
"All members must give 12 months’ notice to withdraw the nomination of a farm from which milk is collected and to leave First Milk to supply another milk buyer. Under the new terms, members must also give 12 months’ notice to transfer their dairy business where milk production will continue on a nominated farm which supplies First Milk."
NFU Scotland president Allan Bowie has since intervened to suggest that holding the Bute producers to another year of below-cost milk pricing could mean the end of dairying on the island, and called on FM to allow them to leave early and use the spot-market boom to save their businesses.
"The milk price Bute producers are currently receiving won’t allow many of them to survive through the winter," said Mr Bowie. “If FM cannot provide reassurances of when it will return producers on the island to profitability, then it should do the right thing and negotiate an acceptable agreement with the producers and their new buyer so that dairy farming on Bute can survive.
“We recognise that FM requires its members to serve a contractual notice period but, in a vulnerable community like Bute, these are exceptional times," said Mr Bowie. 
Regarding the contract change, the co-op’s milk sourcing director Paul Flanagan told The Scottish Farmer: “Over the last few weeks, a small number of members have engineered their retirement in an attempt to get round the notice requirement in our milk supply terms. With our milk supply and customer demand balanced, if any member leaves without serving this notice we would have to replace the milk from the spot market. The additional cost to fund this would have to come out of the pockets of other members.
“With all our producers under financial pressure, we don’t believe that is fair that the majority carry this cost for people trying to avoid their responsibilities," said Mr Flanagan.
Former FM area rep, Campbeltown's Sandy Pirie, commented: “It does seem to be a panic measure to put off any member who may be looking to resign. Once again there doesn’t seem to have been any consultation on this. The newly-formed members council is supposed to do what area reps did, and speak to producers. It’s a disgrace that they are not carrying out that function.”
Farmers For Action’s Scottish spokesman John Cumming was more blunt: “Every member of the the FM board should hang their heads in shame and resign. The spot market is sitting at 40p. Any producer with FM, Lactalis or Muller who is not on at least 25p should resign and be free to do so.”