The UK milk industry was dealt a blow yesterday as two of the country’s biggest farmer owned firms abandoned plans to merge.
Farmers and the wider industry had hoped the combination of First Milk and Milk Link would have allowed producers to better complete with European rivals and have more of a say on prices.
Instead, the two co-operatives, after months of negotiations, have decided to go it alone, after failing to agree on the individual valuation of their businesses.
In a letter to its 2600 members, First Milk chairman, Richard Greenhalgh, said that one sticking point had been the valuation of the group’s stake in Robert Wiseman Dairies.
Gwyn Jones, the National Farmers Union dairy board chairman, said: “We’re bitterly disappointed. Our co-ops are very small and we need consolidation to compete.
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“If we don’t rationalise industry outsiders will come and do it for us. A real opportunity has been missed,” he added.
Dairy farmers have faced hard times in recent years as the price of their produce is increasingly determined by the major supermarkets, and their buying power at home and abroad.
Both co-ops said they were disappointed but that the decision not to merge was in the best interest of their members and that they would continue to develop their business by other means.
They also acknowledged the need for industry consolidation to address competition and refused to rule out potential tie-ups in the future.
Alban Harris, a Milk Link member based in Dorset, said that he wasn’t devastated or surprised by the news, and likened the merger to “re-arranging the furniture on the Titanic.”
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“Dairy prices are set way beyond what these companies can do,” he said. “There’s always going to be competition and the supermarkets can always get together.”
The vast majority of diary produce is bought in the major supermarkets, which have been criticised for both fixing prices and not paying farmers enough for their milk.
Last year Tesco, Asda, Sainsbury’s and Morrisons were accused by the Office of Fair Trading of secretly deciding the price of milk and cheese with five diary-processing companies.
Supermarkets also often take lower priced milk from larger foreign companies, who can produce at lower costs, due to their size and local regulation and subsidies.