MILK Link, the Devon-based dairy co-operative, has defended its decision to cut its producers' milk price by 0.5p per litre despite claims that such a move could be damaging to South West farmers and even put milk supplies in danger. John Daw, a Devon farmer and National Farmers Union South West dairy board chairman, wrote a strongly worded letter to Milk Link chief executive Barry Nicholls, claiming there is no market justification for the price cut in a climate of strengthening commodity prices and that the message the move sends to farmers is hugely damaging.

Mr Daw, a Milk Link producer himself, said that if Milk Link needs more money for long-term investment, it should have raised this by other means rather than cutting the price paid to its producers. "To use a producer price cut to raise funds is hugely damaging to morale, runs the risk of triggering a general downward spiral across the sector, and will inevitably provoke even more farmers into selling their cows, leading to a potential serious shortfall in supplies," he warned.

Mr Daw is urging the directors of Milk Link to reconsider their decision as a matter of urgency or risk inflicting very considerable and lasting damage on prospects for producers and ultimately their own organisation, in the country's most prolific dairy farming region.

But Milk Link, which held a special governing board and council meeting to decide on the cut, says its implementation will support the co-operative's ongoing investment programme and the growth and development of the company.

The unanimous decision by the council, it says, reaffirms the members' long term commitment to their integrated dairy business.

It was decided to increase the contribution paid by its members to their Members Capital Accounts by 0.25ppl to 0.75ppl as soon as possible.

The monies would be directed into processing investment and also paid into a fund for their members when they retired from milk production.

Phil Cork, the members' services manager for Milk Link, told South West Farmer: "The council decided to put .25p of the price reduction into the capital account and for the most part members have been pleased with this move as the members' capital account is an asset on the balance sheet. "We are more committed than ever to its strategy of investment in processing to enable its members to secure a bigger share of the price that consumers pay.

"Milk Link processing in the South West continues to go from strength to strength - for example, in the last year there has been great growth in our Devon dairy and Cornwall dairy brands."