Aurivo is the latest milk processor in NI to change its payment system to reward suppliers for producing higher butterfat and protein.
The new payments come into effect from January 2023, with price increments increasing over the next four years.
Currently, Aurivo values butterfat at 0.1p/l for every 0.05% increment above and below a base of 3.8% to 3.84%, so it is effectively 0.02p/l for every 0.01%.
Protein is valued at 0.016p/l for every 0.05% increment change above and below a base of 3.15% to 3.19%, which is effectively 0.032p/l for every 0.01%.
From January to December 2023, butterfat marginally increases to 0.021p/l for every 0.01% increment above and below a base of 3.85%, with protein at 0.036p/l for every 0.01% change from a base of 3.19%.
In 2024, the butterfat increment increases to 0.024p/l for every 0.01% change from a base of 3.87%. Protein values rise to 0.04p/l over a base of 3.21%.
In 2025, butterfat is paid at 0.027p/l from a base of 3.89% with protein at 0.048p/l from a base of 3.23%.
Finally, in 2026 butterfat is worth 0.03p/l from a base of 3.91% with protein at 0.053p/l from a base of 3.25%.
The changes being implemented are similar in principle to what Dale Farm announced in 2021, and obviously, much less radical than the move to A+B-C being implemented by Tirlán. By 2024, Dale Farm suppliers will be working off fat increments of 0.031p/l for every 0.01% change from a base of 3.95% and protein increments of 0.048p/l from a base of 3.24%.
Milk solids in Aurivo’s NI supply pool have increased from 4.01% butterfat in 2017 to 4.16% in 2021, while protein increased from 3.23% to 3.34%. That leaves the Aurivo milk pool ahead of the NI average of 4.10% fat and 3.30% protein recorded in 2021.
For those suppliers around the Aurivo average for milk solids, our analysis suggests if they keep fat and protein percentages the same, the new payment increments have little impact.
Where a farmer in 2023 produces milk at 4.16% fat and 3.34% protein at a base of 40p/l, average milk price for next year is 41.19p/l, excluding payments for cell counts and volume.
By 2026, if milk quality is still at the same level as 2023, and assuming the 40p/l base is unchanged, milk price for the year averages 41.23p/l.
However, if the same producer is able to increase butterfat to 4.26% and protein to 3.44%, the price received is 42.06p/l excluding bonuses, which is around 0.4p/l more should the current system remain in place.
Where a producer supplies milk with solids below the Aurivo average, they will be worse off under the new increments, unless they improve fat and protein percentages.