FIRST Milk’s announcement on Friday that it would not be paying its farmers on Monday because of serious cash flow issues sent shockwaves through the industry and put even more pressure on farmers who have been bottom of the major processor price league for some time.

The milk payment planned for January 12 is now deferred until January 26, with all future payments also being deferred by two weeks indefinitely.

First Milk has been keen to stress the January 12 payment has been “deferred” on a rolling basis for the duration of 2015. However, when it was put to the company that this was actually a missed payment, especially if there was no commitment to pay farmers that money back further down the line, the firm stuck to its guns and said it was simply deferred. Many farmers are taking a different view.

With prices at the company’s HQ in Westbury realising about 17-18ppl at certain points, the firm has been buying milk at upward of 22ppl for some time. Company bosses said this had caused it to lose about 1ppl on every one of its billion litres, leading to a £10 million financial black hole in the first half of the financial year.

With the deferred payment raising about £10m, the capital investment increase will raise about the same amount and, according to First Milk chairman Sir Jim Paice, hopefully enable it to ride out this cash flow crisis.

NFU deputy president and south Wiltshire farmer Minette Matters said: “I think it is of paramount importance that First Milk shares its business plan with its members. We need to be demanding that happens as soon as possible – there is a real lack of transparency and that is unforgivable.”

Some farmers are very angry. However, some have spoken to acknowledge that, while it is a tough decision, if it works and keeps the company afloat then it is one they can live with.

The situation has not been helped by the temporary withdrawal of China from the market or Russia’s ban on western products. As one analyst said, with 400 farmers leaving the industry last year in the best year for dairying in a long time, what will this year hold? One analyst claimed 2015 could see 1,000 farmers exit UK dairying.