It's fair to say 2020 will go down as a pretty decent year on milk price.

There were warnings in the spring that if COVID-19 took hold among milk processing workers there could be disaster.

It didn’t happen as farmers, lorry drivers and processing workers knuckled down to keep COVID-19 away.

The early spring and summer months are the key for dairy farmers in terms of income. If milk price is good in those months, it can go a long way to making the year good or bad in terms of profits.

Base price

Every month we measure base price for all processors at a standardised euro per kilo milk solids basis at milk fat and protein close to what farmers are producing. If you produce better fat and protein than the 3.45% protein and 4.11% fat standard, then you get a better price.

However, the standardised league allows comparison of prices excluding conditional bonuses like somatic cell count bonuses etc.

Our monthly league is computed at a base 250,000 SCC so if your processor pays a bonus for milk under 200,000 and you make that target then you get a bonus, but it won’t appear in the league as we try to compare like with like. Some processors have bonuses, some don’t.

West Cork dominance

A quick review of 2020 leagues shows the west Cork co-ops dominated from March, paying €4.33, almost 0.13c/kg or 1c/l ahead of the next best and 0.30c ahead of some of the big players.

Most dropped a touch in April in anticipation of a COVID-19 slump that didn’t happen. Price held in May, lifted a touch in June, held for July and then lifted again in August.

It was held for September and October and boards lifted a touch again for November.

That 0.2c to 0.3c per kilo milk solids differential between top and bottom pretty much held for the year, with west Cork co-ops on top and the big players towards the lower half.

Scale

However, the growth in these businesses has been very different.

The west Cork Co-ops produce shy of 600,000 litres in total while Dairygold Co-op processes over 1.4bn litres and Glanbia processes well over 2bn litres. That much increased scale, and particularly that lift in production over the last five years brings costs and challenges, but also opportunity in time, if managed properly. The margin is the business dilemma of managing investments to allow processing capacity while looking at opportunities where dairy product is required and demanded.

No more than a dairy farm, processing scale alone won’t bring profit always and farmers with 80 to 100 cows can often make more profit per cow than other larger farms where inefficiency and costs get out of hand.