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First Milk price increase offsets capital fund rise

First Milk, the dairy company owned by British farmers, is to raise the amount of capital its farmer members have invested in the business in order to line up funding for more added value deals.

The co-op is increasing the amount of capital its members are required to invest from 0.2p per litre (ppl) to 0.5ppl. That additional investment will be offset by an increase in the price paid to members for their milk.

From April 1, the standard litre milk price will increase by 0.5ppl to 29.65p, while milk destined for the cheese and balancing pools will move by 0.4ppl to 28.9p.

In addition, the company will pay out a 3% return on members' capital account balances in April.

Following interest from First Milk employees and some farmers currently supplying other companies about investing in the business, the company is looking at some mechanisms to raise capital from non-members without compromising ownership of the co-operative.

Members will be consulted on this route as part of regular Farmer Forum meetings before exploring the idea further.

First Milk chairman Bill Mustoe said: "We have invested £20 million over the last 18 months on acquisitions and joint ventures through a mixture of existing bank facilities and cash generated from the business.

"In order to speed up our move into added value and therefore start to really move the dial on the returns we can pass back to our members, we recognise we need to go faster and further with our investments."

He added: "The key criteria we are looking for in opportunities are they are added value rather than commodity focused; they allow us to diversify our business; and they can deliver rapid cash returns.

"Having now prioritised a number of options, with the support from members alongside our external funders we have the opportunity to take advantage of added value investments."

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