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Dairy farmers who signed up to fixed-price contracts are currently benefiting from the higher base prices guaranteed under such agreements.
Since January, base prices across all processors in NI have fallen by 6% from an average of 25.19p/l, excluding winter bonus payments, to 23.7p/l paid on March milk.
With processors pointing to further price corrections over the period of peak supply in April and May, dairy farmers who locked in a percentage of their milk supply at a fixed base price are less impacted by these reductions.
Dale Farm, Lakeland, Aurivo and Glanbia Milk all have fixed price contracts currently in place with term lengths running from 12 to 36 months.
Base prices range from 26p/l to 28p/l before the usual premiums on butterfat and protein are included.
Cost benefit
Taking Dale Farm as an example, around one-third of the suppliers are understood to have signed up to both price contracts offered by the co-op.
At the maximum supply commitment for a 1m litre producer, this would cover around 65% of annual milk sales, at a guaranteed base price of 27.2p/l.
From January to March, this would have been worth an additional £4,149 in milk sales compared with selling 100% of milk at standard prices paid by the co-op.
As milk production reaches peak volumes during April and May, a farmer with the maximum volume of milk fixed price at 27.2p/l would generate a further £3,900 in milk sales compared to a standard base price of 24.05p/l during the same two months.
Reducing the volume of milk fixed to 50%, which is closer to actual uptake of the schemes, across the first three months of the year, a 1m litre producer received £3,191 more in milk sales than an equivalent producer outside the scheme.
NI statistics
Meanwhile, DAERA statistics show that 199.19m litres of milk was produced in February. Total production during the first two months of the year stands at 403m litres, a 2.8% increase on 2019.
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