DAIRY FARMERS of BRITAIN ENTER INTO ADMINISTRATION. WHAT DO FARMERS DO?
BACKGROUND
On Wednesday 3 June 2009, Stephen Oldfield, Ian Green and David Kelly, from PricewaterhouseCoopers, were appointed joint receivers and managers of Dairy Farmers of Britain Limited. This will leave many members wanting to know how DFB has found itself in this position, given the hundreds of thousands of pounds that they have provided the business in recent years.
While the members seek the answers to what happened it is very important that the farmers quickly understand what this means to their own businesses and what actions they need to take.
WHAT DO WE KNOW & WHAT DOES IT MEAN?
Members who have supplied milk to DFB prior to 3pm Wednesday 3rd June which they have yet to receive payment for (approximately 19 days of production) are unlikely to receive payment for that milk.
Any milk collected from members following the above time and date will result in a payment being made for the milk but this will not be at the contracted price of around 20.5 pence per litre (ppl) but it is expected to be around 14 – 16 ppl, however this is yet to be confirmed. The administrators have confirmed that they will be making two payments per month with the first payments to be made on the 19th June.
DFB is expected to continue trading on this basis for the next two weeks, after which the administrators hope to award a rolling 4 week contract along with a better indication of minimum base price for conventional, organic and channel island milk.
The administrators have confirmed that due to their appointment all contracts between individual producers and DFB can ceased immediately without any prior notice. However please be aware that if you are in the fortunate position to have secured a new milk contract with a different purchaser you must still inform DFB in writing that you no longer require them to collect your milk. This must be done within ten days of the administrator being appointed (June 13th). The new purchaser cannot collect the milk until DFB have received this written confirmation. It is also the farmer’s responsibility to inform any other legal authority on their change of purchaser.
It is unclear what the position will be in relation to producers wanting to supply a new purchaser after June 13th. However please bear in mind that the administrator will want to find a potential purchaser for the business. What use is a dairy processing business without any milk? If the business does not have any milk then it will not be able to honour its current supply contracts which will again affect the potential value of the contracts and the business.
In relation to the financial farmer investments that have been made these will most certainly have also been lost.
WHAT TO DO
1. Contact your bank manager
If you are affected then the first action you must take is to inform you bank. The vast majority of UK dairy farmers operate with some sort of overdraft facility. The lack of payment for 19 days worth of production along with a reduced in any subsequent milk supplied will have a significant impact on your business’s cash requirements.
It is important to remember that banks and the main lending institutes can only help you if they are aware of your own individual circumstances and needs.
2 Calculate what the initial financial cost is for you
Use the milk collection tickets to provide you with some indication of how much income you are unlikely to receive. While this will be hard and frustrating it is important that you know exactly what you are dealing with. Only then can solutions be found to resolving your business’s cash needs.
3 Contact your main creditors
While I’m sure the vast majority of banks and lending institutes will be working closely with you to find a solution it is important that you also notify your main creditors such as feed merchants and mortgage companies. While this is not an excuse to defer payments they will be more willing to help and support you the sooner they are aware of your position.
4 Look for a new purchaser
While I admire farmer’s loyalty to DFB perhaps it is time to be a bit selfish and think about your own business first. Take advantage of the amnesty that the administrators are offering to secure a new contract with in the next 10 days.
If you are offered a new contract, take the time to review the content of the contract and ensure you understand how it fits with your current milk production both in terms of seasonality and consistency
For those who are unable for various reasons to acquire a new contract a longer term assessment needs to be made about the financial implications for your business. If you are in this unfortunate position it would be advisable to also discuss your position with your accountant as well as your bank manager.
FUTHER HELP AND GUIDANCE
Do not do nothing. It is very important that you at least
discuss with someone the fact that you are a member of DFB.
Additionally, if you would like to find out how our specialised
business consultants can help you then please contact me on 07837
132683 or email alan@alanbasonassociates.co.uk
More detailed information can be obtained from contacting your DFB
Regional Manager. If possible attend one of the following meetings
that have been organised by the administrators:
Friday 5 June – 11am
The Malvern Suite
Carlisle Swallow
London Road
Carlisle
Cumbria
CA1 2NS
Saturday 6 June – 11am
Brittannia Stadium
Stanley Matthews Way
Stoke on Trent
Staffordshire
ST4 4EG
Sunday 7 June – 11am
The Carriage Suite
Barcelo Harrogate Majestic Hotel
Ripon Road
Harrogate
North Yorkshire
HG1 2HU
The following websites offer further information
http://www.pwc.co.uk/eng/issues/dfob_members_page.html
http://www.nfuonline.com/x39436.xml
The NFU website contains information on potential milk buyers
and support networks.
If I can be of any help to you then please do not hesitate to
contact me.
- If we wait for the moment when everything, absolutely everything is ready, we shall never begin - Ivan Turgenev
- Chase your passion, not your pension - Denis Waitley
- The way to get started is to quit talking and begin doing - Walt Disney