The recently announced Lakeland peak milk penalties are very hard hitting on those Lakeland suppliers who have invested in facilities for expansion, but don’t yet have the cows in place, and new entrants starting off.

Speaking to farmers who took part in regional Lakeland meetings in the last week, it seems there were plenty of questions for management about why this situation has come about, with some very disappointed and angry suppliers.

Last week Lakeland revealed it was imposing a penalty on production for April, May and June of 4c/l in the Republic and 3p/l in Northern Ireland. The co-op also announced it was further incentivising milk supply in January in the Republic and October in Northern Ireland.

Processing capacity

At the meetings, suppliers asked why Lakeland wasn’t investing in processing capacity at some of the existing Lakeland sites and other farmers said they couldn’t believe that a co-op would do something like this.

The Irish Farmers Journal understands Lakeland officials said they were looking at a number of investments, but no details were revealed.

It’s fair to say suppliers thought further processing capacity was possible at Bailieborough in Cavan and at the Fane Valley site.

One Lakeland farmer who didn’t want to be named said: “Chief executive Michael Hanley is on the record at numerous events over the last number of years suggesting Lakeland will take any extra milk it can and that they [Lakeland] hadn’t asked suppliers to put their hands in their pockets to pay for steel.

“I’d rather pay for steel than this proposal.”

While Lakeland are not imposing limits on production they are initiating a two tier pricing sending a signal to farmers they don’t want more milk especially over peak milk months April to June. Another frustrated Lakeland shareholder said, “I’ve paid for the steel in this business since it started and now I’m treated like everybody else with a penalty on summer milk. Something is gone wrong here. First step

Surely the first step is to ask all suppliers to share up rather than just collect cheaper milk from all suppliers that haven’t invested in the steel at all. I understand that there are a large number of suppliers north and south that are not shareholders in Lakeland.”

Last week we showed that if you assume a 3% increase in supply then in effect there will be €3m to €4m taken out of farmers’ milk cheques because they are going to buy milk cheaper at peak and any new push to the shoulders is relatively small.

Lakeland is the largest co-op in the country, following the merger with LacPatrick, and now processes over two billion litres of milk.

Privately owned dairy processors in Europe have introduced two tier milk pricing when capacity was limited rather than invest in processing.