The challenge of maintaining low levels of mastitis and high levels of milk hygiene has been particularly acute for many over the past autumn with record rainfall meaning muddier cows and earlier housing, point out independent mastitis management and milk hygiene consultants, Elizabeth Berry and Debbie Gilks who provide specialist member support. And it is likely to be made worse this winter by the dietary stresses resulting from relatively poor forage stocks as well as less strict culling of high cell count cows in response to high replacement costs. Under these circumstances, they advise members to pay particular attention to:

Good pre-milking udder hygiene and preparation;
Consistent post-milking teat disinfection with a quality dip or spray;
Regular milking machine checking and servicing by a competent tester;
Effective cleaning of all milking equipment to the correct wash/milkstone removal regime;
Religious changing of liners every 2500 milkings;
Clean, well-ventilated housing with ample dry bedding;
Tip-top hygiene of all cows at drying off and management throughout the dry period; and,
Bacteriology as well as clinical records and cell counts to pinpoint mastitis problems.

More than ever this season, our consultants insist that attention to detail in both mastitis management and milk hygiene will pay dividends, with a clear plan of action ensuring everyone involved in the day-to-day running of the herd prioritises herd hygiene, is alert for early signs of trouble and knows exactly what to do to nip any problems in the bud.

Council chairman, Stephen Yates has expressed his personal appreciation to all members involved in the latest round of meetings for their interest and understanding.

“I would like to thank all those who have attended the meetings for the calm and rational approach they have shown and for the constructive discussions held”, he said at the end of the two week round of 58 meetings with some 1200 member businesses attending. “There has been virtually no rancour; just a desire to have the broad and serious-minded debate essential for us at this critical time. I have been hugely heartened by the clear majority of members willing to join me in continuing to give our business their support for the time being”.

“I wish everyone a happy Christmas and look forward to a far brighter New Year.”

Just over half way through our round of member meetings and we’ve received extremely valuable feedback on our current restructuring plans from direct discussions with the best part of 1000 people representing around a third of all our member businesses, reports membership director, Matt Sheehan.

“The frank and forthright discussions we’ve had so far have allowed members to express their perfectly understandable frustration with our failure to live up to their expectations,” he said. “They’ve also
demonstrated a huge level of real member interest in our business, a broad understanding of the necessity of the action we are taking and an appreciation that our plan has every prospect of delivering the substantial performance improvement we all need to see.

“The feedback we’ve had from the meetings and the relatively low level of resignations we’ve received to date show the majority of members are prepared to give our Board and Executive time to deliver on the restructuring plan. We’ve also been encouraged by the fact that even those who are resigning are indicating they won’t be committing their milk elsewhere at this stage. Instead, they’re telling us they’re keeping their options open for the time being, both to see whether our plan will actually deliver the benefits it promises and to judge the sustainability of alternative offerings once considerably more water has flowed under the current milk market bridge.

“Members clearly recognise the value of a smaller, lower cost business focused on our best-performing sites and most valued brands and customers,” explained Matt Sheehan. “They have left us in absolutely no doubt, however, that the key to their continuing commitment lies in our ability to deliver tangible performance improvements within a strictly limited time-frame.”

After a full day of frank discussion and debate, our Member Council has given its backing to the restructuring programme proposed by the Board and Executive. However, it has only done so on the understanding that real and progressive improvements are delivered over the next three, six, nine and 12 months. And it will be meeting again in early February to review progress.

“There was certainly some tough talking,” explained Council chairman, Stephen Yates. “After all, necessary though it may be, the sort of medicine we are being asked to take is distinctly unpalatable to us all.

“Overall, we appreciated our new chairman’s refreshingly forthright approach as well as what seems to be a well-structured plan of action to sort out the business once and for all. We found it reassuring that the plan has been assessed by Ernst & Young, and is supported by our key customers and bankers. And we accepted that times are not easy for any dairy processor just now, that most dairy companies are significantly undervalued, and that milk commodity markets have declined substantially.

“In backing the programme, though, our bottom line is that we need to see the promised improvements being delivered rapidly and consistently if we are to continue to commit our livelihoods to this business. We have left the Board and Executive in absolutely no doubt about our requirements in this respect and know they appreciate our patience is strictly time-limited.

“We very much hope everyone will come along to the series of meetings all members have been invited to over the next two weeks to hear the detailed plan for themselves, understand its implications, put their views and concerns to directors and executives, and agree with us the importance and value of giving the restructuring the best possible chance to succeed.”

Our Member Business Centre has established a register of members with dairy cattle to sell – either in the normal course of their business or through dispersals – to put them in contact with members seeking replacements or wishing to expand. All anyone who has cattle for sale or with dispersal sales planned needs to do is provide us with their details by phoning 08700 108181 or e-mailing memberbusinesscentre@dfob.co.uk and we will enter them on the register.

Details:

R Wilkins of Nateby, Preston, have 80 Holstein Friesian cows for sale. Calving all year round and available immediately. Contact R Wilkins 01253 790503

Barlow Bros of Croston, Preston, have one Limousin Bull for sale, 16 months old, available immediately. Contact: Michael Barlow 07921 674041

H W Oultram & Co Newbridge Farm, Deeside, Clwyd: 4 recently calved hifers and 4 in-calf Ayshire heifers . Contact Mr Oultram 01244 532108.

B L Langford, Welshpool, Powys. Pedigree Holstein Friesians for sale, 50 cows, 8 in-calf heifers and 20 maiden heifers. Calving all year round and available for sale from now. Contact Philip Langford 01938 810483.

R Wilkins, Black Lane Head Farm, Preston. Herd of 80 pedigree Holstein Friesians for sale as one lot. Calve all year round and are available for sale now. Contact Robert Wilkins 01253 790503.

Board chairman, Lord Grantchester has set out our revised strategy to Council at a meeting to discuss the detail of the restructuring plans, the current market challenges and the milk price implications of both. He stressed that he remains convinced our core strategy of adding value to member’s milk by owning processing capacity is the only way to ensure producers have sufficient strength in the supply chain. “We acquired ACC to do this, but with the intention that it would be the precursor to a further significant step in industry rationalisation,” he explained. “As a Board, we have let members down by failing to achieve this second strategic move so far. Which, in turn, has meant we have had to focus our attention on developing an efficient, stand-alone business. This has not been easy. It has meant substantial investments in equipment, product development and marketing; the additional tactical acquisition of Lincoln and Bridgend; and, hard decisions in closing under-performing dairies.

“Right up to August we were well on plan to meet our target of breaking even before tax in the current milk year,” he reported. “From then on, though, it rapidly became apparent to us in the new economic climate that we would be unable to continue meeting our performance targets through to the year end. This left us with no option but to change tack in a major way. Instead of pursuing our previous strategy of growth to achieve scale, we have refocused our efforts on achieving a smaller, leaner and, above all, profitable business.

“Consolidating our processing around three strong regional dairies, two excellent cheese plants and one valuable bulk milk factory while reducing our network of distribution depots and headquarters overhead proportionately will substantially cut our operating costs and increase our dairy utilisation to deliver a rapid improvement in business profitability. Because it requires no increase in sales and involves no new product or other development expectations, I’m confident we will be able deliver on this plan to ensure genuinely competitive member returns in 2009.”

Apologising to members for the extent to which the business has failed to live up to their expectations to date, John Grantchester pledged to keep everyone fully informed about our progress in meeting the improvement plan on a regular basis. “I urge as many producers as possible to back our Board in supporting what I firmly believe is the best way of protecting our mutual investment,” he said.

Following a recent visit to members in Cumbria, our new chairman, Lord Grantchester has pledged to keep everyone as fully informed as possible about our business position and progress as he leads our board and executive in addressing the challenges the current market presents.

“As far as I am concerned, members have the first and last word in our business,” he stressed. “We, with the ‘middle word’, have to be completely accountable to those who commit their livelihoods to the co-operative. We all appreciate the extent to which speculation can get in the way of the sustainable future we seek. Within the obvious bounds of commercial confidentiality, I am adamant that we must communicate better as we move forward if we are to build and maintain the trust and commitment of members, employees and customers. That way everyone can really understand the business they are building and the strength working together continues to gives us all.

“With the new Council structure now in place we shall be undertaking a countrywide series of meetings in December to update members on our business performance and development as openly and completely as we can. I urge everyone who is concerned about our business to talk to us and keep talking to us rather than listening to others if they want to appreciate the realities of our business”.

Our Council has received a categorical assurance from the Executive at this month’s Membership Development Group (MDG) meeting that milk cheques will be paid into members’ bank accounts as normal at the start of next week. The MDG, which meets every month to consider all aspects of membership interest, felt it vital to reassure everyone of this fact in the face of the scurrilous rumours circulating in the industry. “Regardless of what others may speculate, the simple fact is that our business will continue to pay members in full for all their milk just as it has always done,” farmer director, Michael Oakes said. “It is simply not an issue, as everyone will see for themselves by Monday.”

Non-executive chairman, Rob Knight, has resigned from our Board with immediate effect. Announcing his decision at this week’s Board of Directors meeting, Rob who has chaired our business since 2003 said: “I’m proud to have played a part in the huge progress we have made in the past five years, transforming ourselves from a small milk broker into a major dairy processor. As our business moves into a new phase in its development it is an appropriate time for me to hand over the reins.”

Farmer director, Lord Grantchester, who will act as interim chairman, thanked Rob for his valuable contribution and wished him well for the future, identifying clear challenges for every dairy business in the current trading environment. “Our team is working hard to ensure we adapt to the changing industry in a way that will deliver the greatest long-term benefits and security for our members.
I share the determination of our Board, Executive and Member Council to work closely together to make this happen.”

Commercial director, David Potts is leaving our business this week to take up the role of managing director of NOM Dairy (UK), the Austrian-based dairy leader currently mounting a major offensive on the UK yoghurt and yoghurt drinks market from a brand new £40 million dairy and headquarters in Telford. Thanking David for his contribution and commitment to our business, we wish him every success in his move and look forward to a continuing relationship as NOM becomes a customer of DFB’s milk supply business later in the year.

Philip Moody has stepped-down from our Board of Directors with immediate effect to allow him to focus on the role of strategic adviser to the business in his capacity as managing director of Smith & Williamson Corporate Finance Ltd.

Long-standing Shropshire member and experienced FTSE 100 board director, Roger Taylor has been elected to serve on our Board of Directors under the normal Council process following the end of current vice-chairman, David Wilkinson’s three-year farmer director term. With existing business commitments making it impossible for Roger to fully take up his position immediately, David has generously agreed to remain on the Board until next February for the greatest possible continuity.

Thanking David for his valuable input to our development over the years and continued commitment, Council chairman Stephen Yates welcomed Roger Taylor’s extensive, high level business experience and proven leadership talent. “As chief executive then chairman of Sun Alliance, Roger was responsible for developing its business widely as well as overseeing its merger to create insurance giant, Royal Sun Alliance,” he explained. “Closely involved with running his herd of 450 pedigree Jerseys at Blodwell Hall near Oswestry, he has the further advantage of a thorough understanding of both modern dairying and our business”.

“A loyal member with a substantial stake in our success who currently chairs our Channel Island Committee, Roger has a clear appreciation of the issues we face, well-developed views on how to address them, and a determination to deliver for the membership,” he stressed. “He will begin working with the Board straight away, although it is likely to be the New Year before our business can profit from his full attention.”

The events of the wider world and domestic economy are genuinely unprecedented and it is simply not possible to know what effect they may have on any or all businesses in the dairy or any other sector. We are working in unpredictable circumstances. In running a business without carrying general reserves, (as we have always paid back to members all that we receive from customers), the increased risks have to be recognised and DFB must do what is judged necessary to protect members’ best interests. This may mean, as on this occasion, taking difficult and tough decisions.

With regard to the financing of the business, the position remains unchanged. The banks remain fully supportive and continue to work closely with us, as is to be expected in the current climate.

Whilst taking a prudent approach with cash, it is also important to recognise that both milk price and interest payments come from the same pot – the Profit and Loss account – and not paying this half years’ interest gives us the best potential to optimise milk price to members. This was a fundamentally important consideration in the Board’s decision.

Milk demand is currently being influenced by an increasingly volatile and rapidly moving market. The liquid market appears at last to be reasserting itself, but with increasing domestic production short-term and, for the first time, significant liquid milk imports, this market has not hardened as would be expected at this time of year. Spot market prices are well down on expectations and commodity markets globally are some 20-30% below the levels of this time last year. Taking these factors together with the wider economic pressures, it re-emphasises the need to take a very cautious approach and build in a protective buffer within the business.

It was against this background that the Board of Dairy Farmers of Britain announced to its members its decision not to pay interest on MIAs and MCAs for the first half of this year. As the statement indicated, this robust decision was a cautious response, taken against the background of extraordinary economic circumstances.

The Board would like to reassure our members that it will keep this developing situation under review and will continue to prioritise the needs of the members now and in the long term by ensuring that the business is guided prudently through this challenging period.

If the opportunity to redress this position occurs, whether through interest payments or milk price, your Board will of course consider it.

Following a distribution agreement with the Snowdonia Cheese Company, we shall be extending the marketing of the premium, award-winning Welsh wax truckles developed and produced on its behalf at Llandyrnog to major multiple retailers and convenience stores across the country. Working closely with Snowdonia, we are confident our strong national retailer relationships and distribution facilities will substantially boost the reach and uptake of the range of attractive 200g truckles like Black Bomber, Green Thunder and Pickle Power which have established such a reputation for quality and Welsh provenance through the company’s highly successful marketing efforts in the delicatessen, farm shop, on-line and independent retail sectors, explains cheese marketing manager, Mike Whetter.