The case for changing milk pricing in NI to a milk solids-based system was again made by local dairy consultant Jason McMinn during the recent Ulster Bank webinar.

He said that better incentives for NI farmers to produce higher butterfat and protein content milk would mean the value of each litre for processing would gradually grow.

McMinn presented figures which showed the value of milk per litre in NI increased by only 1% from 2012 to 2019. In the Republic of Ireland, where milk pricing is based on solids, the average litre rose by 7.3% from 2009 to 2018.

“We are an exporting country. We don’t export litres. We export butter and powder and everything else. I think we should be following the south and pricing milk that way,” he said.

Even if processors could re-balance it to 23-24p/l, it would be a good start

However, McMinn suggested that simply updating the current system so that bonuses for butterfat and protein are based on higher base prices would a useful first step.

“They designed the increments for milk pricing when base was 18-19p/l. Even if processors could re-balance it to 23-24p/l, it would be a good start,” he said.

Example

So if we take the example of a processor paying off a base of 3.18% protein and 3.84% fat.

For every 0.01% increase in protein, a farmer gets an additional 0.035p/l, and for every 0.01% increase in fat, it is 0.021p/l.

These increments for fat and protein are the same irrespective of whether milk is 18p/l or 30p/l. As a result, when prices are high, the value of solids as a proportion of the overall milk price is less.

If we rebalanced the current system as McMinn suggests, applying a 33% increase (the same percentage increase as moving from 18p/l to 24p/l), it would increase the protein payment per 0.01% to 0.046p/l and the fat to 0.028p/l.

For a farmer producing milk of 4.4% butterfat and 3.45% fat, rather than currently receiving 2.13p/l for milk solids above base, it would be a payment of 2.8p/l.

Read more

NI farmers need 26.2p/l to break even

NI payment must change to milk solids – McMinn