OF late there has been much debate in the dairy industry about whether farmers should invest on-farm, in dairy processing, or neither.

There remains clear evidence that by investing on-farm significant efficiencies and productivity gains can be secured. Similarly, we believe the strategy pursued by Milk Link, to invest beyond the farm gate, will deliver security and sustainability for our members' enterprises in the medium term.

Of course, for many dairy farmers the opportunities to invest on-farm are restricted due to current returns but it is nonetheless interesting to consider the choices Milk Link members made when they were recently asked if they wanted a proportion of their initial Milk Link investment repaid or left in the business.

In early August, Milk Link wrote to all its members with Capital Proceed Loan Notes (CPLNs) to ask them if they wished to receive this money back as cash or reinvest it into the co-operative for additional certificates (Qualifying Loans, which represent each member's stake in Milk Link).

Whilst undoubtedly some members chose to take the money to ease their cash flow, it seems others decided to invest the money in on-farm expansion, and a further significant proportion opted to leave the money in Milk Link. By reinvesting £1 million, which they could have received as cash, our members have demonstrated continued support for the strategy of adding value to their milk. In addition to the £1 million, our founding members received back a total sum of £5.7 million.

The CPLNs had been issued to members in 2001 to represent the money they transferred across from Milk Marque at Milk Link's inception. With the repayment announced formally at our AGM on Tuesday, September 12, the board also confirmed the issuing of Qualifying Loan Certificates to all members had been completed, based upon the amount of money in their Member Capital Accounts as at March 31 this year.

The certificates are tradable instruments which allocate fairly the underlying value of Milk Link on a basis which reflects the length of membership. In addition, the certificates provide a mechanism to reward capital investment into Milk Link separately from milk supply.

The repayment and issuing of these certificates is an important step forward in our plans to develop and grow the business. Back in 2001 we committed to return this money within five years, an undertaking which we have delivered on.

In return, a third of the CPLN money which could have been reinvested, has been - a demonstration of the continued confidence our members have in the co-operative. As we have kept our promise, they have shown faith in our strategy of developing Milk Link into a world class business, generating maximum value from assets and ensuring strong returns for members.

The investment by our members five years ago allowed us to develop the business and transform it into a vertically integrated dairy business. We look forward to putting the £1 million reinvested to equally good use.

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