UK dairy co-operative First Milk is proposing to change the way it pay its farmer-members.

The company, which is the largest dairy-farmer co-operative in the UK, said the move is designed to reward its members for the investment they have put into the company in recent years.

First Milk said the proposed changes would "reward members' contributions through a combination of interest and dividend payments plus a new share scheme, where members can 'trade' their shares".

First Milk will continue to pay interest on a members' capital account but will also set up a system of preference shares, on which members will be entitled to a dividend based on the performance of the business.

First Milk chairman Richard Greenhalgh said: "As First Milk has grown over the last few years, members' capital invested in the business has also grown considerably. The new structure aims to reward members' loyalty and their milk volumes. We believe that it will also enable members to have greater clarity around how the business is performing."

The company told just-food that, in less than two years, it had "moved from primarily a milk brokerage business to a business with three separate divisions - milk, cheese and ingredients".

The co-operative, which handles 1.8bn litres of milk a year and is the country's largest UK-based cheese supplier, generated GBP484m (US$866.1m) in turnover in 2007.

First Milk members will vote on the proposal in November. If approved, the plans should go live next April, First Milk said.