FOLLOWING four consecutive months of milk price rises, Scottish-based dairy co-op First Milk has announced that it is to hold its farmgate price for December.

Explaining the move, farmer director and vice-chairman Jim Baird said: "This year, we have been able to return significant increases in milk price as a result of market conditions and ongoing improvements in our business performance.

“At the current time, however, world dairy commodity markets have stabilised and so the outlook for future market performance has started to soften. As a result of these developments, we have decided to hold milk prices.

“Our continued focus remains on driving efficiency and quality through our operations, building on our strong, long-term relationships to deliver competitive total returns to our members.”

But speaking ahead of the AgriScot business event this week, dairy market analyst Chris Walkland questioned whether the co-op’s business was yet on a solid footing, despite its recent posting of trading results with a net profit of £6million.

Mr Walkland said: "First Milk's transformation isn’t complete, Far from it. That’s because while it is now out of survival and turnaround mode, it now needs to turn itself into the business that its loyal battle-weary suppliers deserve.

“They don’t just want to be members, they want to be proud, loyal members. And pride has been lacking in recent years," said Mr Walkland, referring to the co-op's notoriously prolonged price slump. “The challenge now is to win back the hearts and minds of its farmers, which it lost as its milk price plummeted in comparison to rival firms. And it needs to grow its volume again."

Referring back to the co-op's previous trading performance, he noted that back in 2013/14, First Milk had a turnover of over £600million, and made a loss of £4million; in 2014/15 it turned over nearly £440million, but made a loss of £25million; in 2015/16, £300million turnover produced a loss of £5.1million – and now this year, a far smaller turnover just above £200million produced a profit of £6million.

By comparison, the UK’s other major native farmer co-op Dale Farm posted profits before tax of £7.9million last year, on a turnover of £389million and likely to exceed £400million this year – twice that of First Milk now.

“Turnover is volume related and while it may be back in profit, First Milk has to start to grow again and replace the milk it has lost, and possibly continues to lose on the back of resignations," said Mr Walkland.

“Only a comparable milk price will do, and on that basis First Milk is much better than it was. At its worst the First Milk price was 10% adrift compared to the average non-aligned price, but now it is 3 to 4% away. Much closer, yes, but not eliminated. Only when it is, and when milk volumes grow again on the back of the optimistic, investment-orientated farmers, will the transformation of the business, in my eyes, be complete.”