For the second year in succession, Lisavaird co-op in west Cork has emerged as the milk processor that paid the highest average price for manufacturing milk in the Irish Farmers Journal KPMG milk price review.

It is the fifth time in 10 years that the west Cork co-op, which is part of the Carbery group, has led the KPMG milk price review which computes the average price paid for milk used in manufacturing over the course of the calendar year.

Lisavaird paid an average price of 34.66 cent per litre (c/l) in 2011, or 34.32c/l after the deduction of collection charges and levies. Second place in the milk price review went to fellow Cork coop, Barryroe, for the second year in succession, having paid a net price of just over 34 c/l.

In a welcome return to form, Ireland’s largest co-op, Dairygold, returned to the top three, paying an average net price of 33.90 c/l for 2011.

Cork’s dominance of the top five was completed by Drinagh (4th) and Bandon (5th) who paid an almost identical average price of just under 33.8 c/l.

The two public quoted milk processors, Glanbia and Kerry, both paid a price that was marginally above the average. As illustrated in Figure 1, they were €15 and €5 per cow above the average, but €46(Glanbia) and €55 (Kerry) per cow behind Lisavaird (Figure 2).

As has been the trend in recent years, northern co-ops in more difficult terrain are paying a milk price below the national average (Figure 1).

The most obvious geographical exception is Wexford co-op, which, despite the benefit of the highest milk constituents in the country, is languishing at second from bottom. Wexford paid a 2011 milk price €1.30 per cow behind Lisavaird. Tipperary are also marginally (€8 per cow) below average.

Lakeland, who opened an efficient new drier in 2010, appear to be benefitting from the €20m investment, with their ranking improving from 12th to 9th for 2011. Their milk league performance in recent months suggests further improvement is possible.

Connacht Gold, Arrabawn and Town of Monaghan complete the lower echelons of the table. In the case of Monaghan, this is partly due to low milk solids which, at an average of 3.76% fat and 3.26% protein, are notably lower than the rest of the industry.

West Cork dominance

Apart from the three years when cheese makers Wexford (2005 and 2008) and Newmarket (2006) topped the table, west Cork co-ops have topped the milk price review for two decades. This is due to the excellence of the Carbery Milk Products business and a singular co-operative focus on maximising milk price to farmers. Performance this spring suggests the result in 12 months' time will be no different.

In contrast, plc companies such as Glanbia and Kerry are consistent in their mediocracy - paying a mid-table milk price each year. However, farmers that supply these processors also benefit to varying degrees from non-milk cheque returns such as dividends and share price appreciation.

In the case of Kerry over the past 25 years, this has generated significant cash for farmers through dividends and plc share price spin-outs, while Glanbia’s past decade of growth has led to considerable appreciation in the paper value of the farmer co-operative. Kerry’s public commitment in 2011 that they would pay a “leading milk price” should impact positively on their performance in future annual milk price reviews.

In recent years, some critics have claimed that the west Cork milk price was artificially inflated by returns from non-dairy investments in property, energy and other sectors. The continued Carbery related dominance post-Celtic Tiger should put an end to such nonsense.