Base milk prices for milk supplied in October in NI are showing increases from 1.75p/l at Aurivo to 2.5p/l at Dale Farm with the other co-ops on +2p/l.

The increases are in response to improving conditions in dairy markets as indicated by a series of improved auction results at Fonterra; higher Dutch product prices and the Irish Ornua purchase price index (PPI) showing strong increases.

The increases put base prices to 21.9p/l at Glanbia Milk and Fivemiletown and to 22.5p at Dale Farm with the other co-ops at 22p. Strathroy Dairy, with its concentration on the liquid milk market is at 23p/l, which is an increase of 1p/l.

While price increases are most welcome, not everyone is convinced the market is sound. Dairy analysts at Rabobank believe that the fundamentals in world markets have not changed and point to the ongoing Russian ban, weak demand in China and Brexit; although they take some comfort from falling world milk supplies, except in the US.

Meanwhile, two other factors are helping milk prices in the short term. First is the payment of winter bonuses, with more companies deciding to pay a bonus on October milk, and at a higher level in some cases. And, second, milk quality is at seasonal highs, which boosts payments in the milk cheque.

Winter bonuses

Leading the way on winter bonuses is LacPatrick co-op which is paying 3p/l for October milk; and it plans to pay 2p for November milk. This is a reversal of its payment pattern last year and will be welcomed by suppliers as getting the bigger payment into the earlier milk cheque.

With the end-of-year bonus having been pulled forward to September, it remains to be seen if they will be in a position to pay anything extra for December milk.

At Aurivo, Glanbia Cheese and Dale Farm, the bonus is 2p and they plan to give similar amounts in November and December.

Lakeland has no bonus for October milk as it concentrates its payments in November and December at the rate of 3p in each month.

Strathroy Dairy, with its different market emphasis has a winter bonus of 1p, and payments at this rate are scheduled through to February of next year.

At Glanbia Milk, and for the milk it purchases from Fivemiletown suppliers, winter bonuses are not paid out; instead it makes bonus payments totalling 0.6p/l throughout the year.

Milk quality

Milk quality is at a seasonal high for both butterfat and protein and gives a welcome increase in payments. In the league for the 650,000 litres a year supplier, fat is at 4.18% and protein at 3.44%. Depending on the rate of payment for butterfat for each company, this boosts the price by 0.6p/l to 0.7p/l; and for protein by 0.7p/l to 1.p/l; in total from 1.3p/l to 1.7p/l.

Of course, individual farmers can obtain substantially more. Examples are a Tyrone producer earning 2.34p from his Holstein Friesian herd, bred specifically for quality; and a Down producer earning 5.54p from his New Zealand style crossbred herd.

The league

In our league for October milk, LacPatrick is a leader with almost 27p for their Red Tractor suppliers and 26.73p for non-Red Tractor. Dale Farm Red Tractor are above 26p. Glanbia Cheese Red Tractor, Aurivo and Strathroy are above 25p; while the others are just under 24p.

The rolling average prices for the 12 months to October are showing increases from 0.3p/l to 0.5p/l compared with the 12 months to September. This comes from the increases in base prices paid since July of this year.

On average, October base prices are up by 5.3p/l since July; and compared with September, the increase is 2.1p. Compared with October last year, the base prices this year are 4.2p higher.

For average quality milk for the 350,000 litres per year producer (Table A), the 12-month price is from 19.41p at Glanbia Milk and Fivemiletown down to 18.8p/l. For the one million litres (Table B) per year producer, the 12-month price is from 19.77p/l at Glanbia Cheese Red Tractor down to 19.35p/l.

Quality

For good quality milk, the position is better with all producers getting 20p, or more. For the 350,000-litre size, the prices range from 20.68p at Glanbia Milk and Fivemiletown down to 20.08p. For the one million-litre producer, the price range is from 21p at Lakeland Dairies down to 20.44p.

However, for producers with poor levels of butterfat and protein, the position is difficult. For the 350,000-litre producer, only one co-op, Aurivo gets to 18p (18.03p, to be precise). The others are at 17.7p or less.

For the one million-litre producer, the top is 18.4p at Glanbia Cheese Red Tractor with the others at 18.3p or less. Producers with below average quality milk are suffering with prices almost 3p/l less than producers with good quality, highlighting the absolute necessity of the need to improve milk compositional quality if milk solids are low.

Looking at the difference between top and bottom prices for each quality shows that the differences are small at 0.6p for good quality and 0.4p for average quality. For below average, the top-to-bottom gap is slightly larger at 0.92p for the small producer and 0.78p for the big producer.

  • Note that our tables do not include the fixed-price element at Lakeland and Aurivo, nor the top-ups paid to Glanbia Milk suppliers who receive bonuses as members of Glanbia Co-op.