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Following on from an emergency meeting held this week, the board of NI’s third largest milk buyer, LacPatrick Co-op, has announced its intention to seek a joint venture, partnership or merger with another milk processor.
Events were brought to a head after the decision taken last Friday to cut milk price by a further 2p/l for March supplies, taking the base price to 25p. That came after a 2.4p/l cut to prices for milk supplied in February.
Up to that point, LacPatrick had performed strongly in price leagues over the autumn and early winter. But for March supplies, a base of 25p/l, is significantly less than competitors, and effectively 3p/l behind the offer from Dale Farm for the same month. That has caused a lot of anger among suppliers, and at the start of the week it is understood that LacPatrick had over 20 letters from farmers serving notice to leave.
There is also an additional dozen suppliers to Linwoods, which is to move over to LacPatrick from 1 May 2018.
A number have been approached by other milk buyers in the last few days.
What happens next remains to be seen, but it is expected that most existing LacPatrick suppliers will now wait until the future of the co-op becomes more clear.
As recently as last September, LacPatrick chief executive Gabriel D’Arcy went on the record stating that more consolidation is necessary within NI milk processing. With a new £30m dryer at Artigarvan capable of processing up to 500m litres of milk per year, the company has significant over-capacity, when its other sites at Ballyrashane and Monaghan are added in. The total LacPatrick milk pool stands at around 600m litres, 500m litres of which is sourced in NI. There are just over 1,000 farmer suppliers to the co-op.
Therefore, in many ways, a tie-up with another co-op makes sense. The most obvious suitor is Lakeland which has a milk pool of around 600m litres in NI, but processes most of this milk south of the Irish border.
Sources indicate that at a board meeting of Lakeland yesterday (Wednesday) the green light was given for its chair, Alo Duffy, to enter into discussions with LacPatrick. It is understood that the likes of Aurivo would also be open to having talks.
Glanbia is also a possibility, and would be attracted by the processing capacity, but it has a small milk pool in NI. The potential of a hard border post-Brexit might be receding, but it is still a factor to be taken into account.
That leaves Dale Farm, NI’s largest milk buyer, with a pool of over 800m litres. It has sufficient processing capacity, and is currently focused on driving efficiency within its own business. But as a minimum it is keen to attract new suppliers, especially those in winter milk. The 100 ex-Ballyrashane farmers who now supply LacPatrick with approximately 100m litres, could yet be a fertile hunting ground, depending on where LacPatrick goes next.
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