Farmers, processors and the environment will all be winners if the NI dairy industry adopts a new payment system for milk based on fat and protein, a meeting in Antrim on Monday night was told.
Attended by over 120 dairy producers, the event was organised by Solid Change, a group of progressive farmers supplying a number of different dairy companies, who all want to see NI gradually moving to a new way of paying for milk.
Setting the context, local dairy consultant Jason McMinn said that the current fat and protein increments used by most NI processors have been fixed since 1986, and value milk at around 20p/l, so at current base prices, water is effectively priced at around 10p/l.
He argued that farmers are not getting a signal to produce higher solids, and as a result, our percentage fat and protein combined is the lowest of any major European milk production region.
“Our competitiveness is sitting still. We should be worried about this,” said McMinn.
Driving home the message was Ballymoney dairy farmer Gary Thompson who sought to debunk some of the myths around a payment system for milk solids. He pointed out that it was about increasing the value of the entire sector, not penalising one farmer to advantage another, that it would not lead to a wholesale switch to spring calving in NI, and it was possible to produce good solids from high-yielding Holstein cows.
Thompson used actual figures from one of the Solid Change farmers who has focused on genetics for 12 years, increasing milk yield over the period by 16% (to 9,783l per cow) and milk solids by 25% (to 763kg per cow – 4.24% butterfat and 3.33% protein).
To illustrate the point further, he took NI average performance in 2020 of 7,900 litres per cow at 4.06% butterfat and 3.30% protein.
Taking a “business as usual” approach, he said that the average herd will probably be producing 8,500l in the future (at current rates of progress this could be as soon as 2025). Assuming fat and protein percentages are unchanged, total milk solids would increase from 600kg to 644kg per cow.
But if farmers were given different market signals, and instead bred and fed for fat and protein, Thompson suggested that the same 644kg of solids could be achieved from 8,070l cows. So farmers would be producing 430 fewer litres for the same solids output, which at a feed rate of 0.45kg/l, is a concentrate feed saving of 193.5kg/cow (19.35t in a 100-cow herd).
Processors would then have less water to pump, heat, cool and dry, would have more processing capacity at peak months (no need to invest in stainless steel), and an estimated 5,000 fewer tanker loads of milk to haul each year, all for the same output of product.
Taking everything together, Thompson suggested that there is £20m of cost in the system that could be shared among farmers and processors.
“This is all waste with a huge carbon footprint. It makes no sense at all. We are paid on the one hand, and reach it out with the other. No one is winning – the farmer, the processor or the environment,” he said.
He also pointed out that under most current pricing arrangements, a farmer producing 644kg of solids off 8,500l gets paid more than a farmer producing the same solids from 8,070l cows. “That is absurd – it is total nonsense. It makes no sense at all,” he said.
What does the Solid Change group want?
It was made clear on Monday night that the Solid Change group is not looking to replicate the A+B-C payment model used in New Zealand or the Republic of Ireland.
In that model, a processing cost per litre (C) is deducted from the value of each kg of protein (A) and butterfat (B) supplied.
It would suit high solids producers, but to the detriment of those with lower fat and protein milk.
A fear among co-op boards is that it might also encourage more farmers into spring milk, challenging the current reasonably flat supply profile.
“Beware the ‘minus C’. We don’t need any more stainless steel to process milk for three weeks at the end of April/early May,” suggested former head of dairying at CAFRE, Ian McCluggage.
Instead, the Solid Change group would initially like to see milk processors increasing increments for fat and protein over the next few years to better reflect current milk prices.
Glanbia Ireland have led the way on that in NI, with a new pricing structure that, by year four, values fat and protein in milk at around 30p/l.
Lakeland also made some tentative steps, with higher increments for additional fat and protein above each supplier’s base year figures. That move came in for some criticism on Monday from suppliers, but also an acknowledgement that it was a step in the right direction.
“I can see what they are doing, but I can also see the flaw in it. I hope it is a temporary measure,” commented Jason McMinn.
Ultimately, the Solid Change group would like to see a long-term pricing structure in NI based on protein and fat (A+B), with volume bonuses retained for larger suppliers. While they acknowledge that farmers must be given time to adjust, they want the industry to collectively set a new direction of travel.
“Speak to your processor. Ask them to get on with it. It’s been kicked down the road for long enough,” concluded Gary Thompson.