Dairy farmers face financial crisis

The co-operative, which is owned by British farmers, said the move will help build a "stronger business platform" after a "year of volatility that has never been seen before" in the global dairy industry.

NFU Scotland agreed the move was First Milk's only choice, but criticised the timing of the delay when prices are worryingly low.

Around 400 farmers are likely to be hit by the deferral, which could cause major cash flow problems.

Gary Mitchell, chairman of NFU Scotland's milk committee, said: "The farmers were told about this on Friday and we've been speaking to the banks since then about making allowances and so far they've all been pretty supportive.

"This is action First Milk had to take to stay in business. It's the best option rather than introducing another cut.

"It's just unfortunate that they have decided to do it when milk is at a low price, it would maybe have been better if this action was taken at an earlier date."

He added that some farms may be forced to close as a result of the delay, saying: "If farmers have been struggling and thinking about it for a while, this could be the deal clincher for them to decide to close down."

Farmers have been facing increasing financial pressure over the last few months due to falling milk prices, with some producers no receiving just 20p per litre for milk, the lowest price since 2007.

This has been linked to a Russian ban on food imports from the West, as well as China withdrawing from the market.

NFU Scotland said it is particularly concerned for "peripheral farmers" in places like Bute and Kintyre as they have tougher economic conditions due to increased delivery costs.

Many of these farms rely solely on First Milk.

Mr Mitchell added that consumers could do their bit to help the farmers by buying Scottish cheeses.

"At the moment we have no indication when the market's going to turn and that's more worrying than anything else," he said.

"What would help is people buying Scottish cheeses such as Mull of Kintyre, because at the end of the day, it's the added value products which will help farmers financially.

"I would urge people to get out there and help our own home market."

David Handley, chairman of lobby group Farmers for Action, claimed farmers are facing a "dire situation".

He said: "When farmers get told they've got a delay of two weeks in receiving their milk cheque, it's a pretty serious situation because within that two week period you've got to go and be able to tell your bank manager, your creditors, that there is a delay.

"Some people may be lucky enough to be financially sound enough that their bank supports that. There are many that are stretched already. Their bank manager may see this as a death knell and say sorry, we cannot support the business for another fortnight."

In a statement, First Milk chairman Sir Jim Paice said: "We understand that the milk payment deferral will cause concern for members as direct debits and payments will have been lined up against milk cheques.

"On that basis, we are working with all major banks at national, regional and local levels to explain the rationale around this decision. That way, bank managers should be well equipped for any conversations they have with First Milk members.

"We are a business owned by dairy farmers. The board are acutely aware of the difficulties this current extreme volatility is causing First Milk members and the UK dairy industry.

"We don't know how long this current market downturn will last, and we are aware that hundreds of UK dairy farmers are unlikely to find a home for their milk this spring.

"Our priority is to make the business and our processing assets as secure as possible in order that we can continue to process and market every litre of our members' milk."

Last year it was revealed that the number of Scottish dairy farms had dropped to a record low, with just 993 farms in operation compared to 5,735 when records began in 1903.