Oral - Dairy Farmers of Britain

PricewaterhouseCoopers were appointed as receivers and managers of Dairy Farmers of Britain Lt, the agricultural milk co-operative, on Wednesday 3 June 2009. This followed an invitation by its directors to DFB’s Bank, HSBC following a prolonged period of operational and financial restructuring during which they closed down several plants  and members’ debts were converted into shares. Dairy Farmers of Britain’s major contract to supply fresh milk to the Co-operative Group was not renewed and had an end date of 1 August 2009.

The announcement last week of receivership was clearly disappointing news. It is also a reality that many associated with DFB will have lost money. These events bring home starkly the real difficulties facing businesses during the current recession and, in particular, the trading pressures within the dairy industry.

DFB’s business was centred on England and Wales. My focus is on the milk producers in Wales supplying the two Welsh facilities—Llandyrnog in north Wales and Bridgend in south Wales. These plants currently employ some 380 with milk supply from around 220 Welsh dairy farmers.

Earlier today I met the receivers for a further update on the latest position. My officials and I will continue to talk and meet with the receivers as circumstances dictate.   

The receiver is, with the support of DFB’s bankers, HSBC, continuing to trade: farmers who remain with the business will receive a payment for their milk in the middle of this month and again at the end. The level of payment will depend on the price the receiver can realise for the milk produced. Farmer members are not being held to their previous DFB contracts and I understand that approximately half of DFB’s milk volume may have moved to other buyers already, representing about a third of their members. I understand that the hauliers will continue to collect milk from those remaining with the business, who will be paid regularly at a fair price for the supply.

The receiver has, with the chair of DFB’s member council, been holding meetings with members and ex members of DFB. As I speak, it is meeting in St Clears to inform farmer members of the situation and their plans. Members will be able to ask direct questions and make sure the receiver is aware of their situation.

I trust that Members here today will share my support for the efforts that the receiver is making to reassure milk producers in Wales who have been supplying DFB. The industry as a whole has worked constructively to try to ensure that the complex supply arrangements between DFB and other businesses continue to operate smoothly.

I can well understand the market forces that will lead a number of milk producers in Wales to seek an alternative to DFB. However, no producer should feel pressured to change in what I recognise as a difficult and uncertain time. Producers need to be able to reach an informed decision about their future supply arrangements and should not feel pressured into reaching a decision that may not be in their best interests—in the short or longer term—for the future of their farm enterprise. The receiver and the National Farmers’ Union have set up helplines that can provide advice on various financial and legal issues.

At the time of the receiver’s appointment, DFB employed around 1,500 people and had about 1,800 farmer members. It supplied more than 1 billion litres of milk a year, representing slightly under 10 per cent of United Kingdom production. In Wales, the Llandyrnog site employs some 160 people. The receiver is reasonably confident that a sale to secure the future of the facility can be concluded to the satisfaction of suppliers and customers alike in the not-too-distant future. The position at Bridgend, where some 220 people are employed, is not so advanced, although I understand that there is some commercial interest in the facility. A key factor here is that suppliers and customers need to demonstrate confidence in this creamery over the coming days.

If we all work together the hope is that we will be able to lessen any short-term impact on the industry and on individuals, securing the best chances of finding buyers for the remaining businesses, giving hope to farmers, employees and other dependent businesses in the longer term. However, there are still difficulties in terms of the way forward to assist everyone. I will provide more information to Members as required.