The winter milk bonus of 2p/litre paid by Donegal/Aurivo Co-op on February milk supplies put its prices at an outstanding 35.7p/litre in the monthly league table.

This is the price calculated according to league conditions and in accordance with the deductions applied by Donegal/Aurivo for milk transport. The price of 35.7p/l applies to milk collected daily or on alternate days.

The league prices are after deduction of transport charges applicable to a supplier of 500,000 litres per year, with average NI seasonality of supply and with average February milk quality at 4.06% butterfat, 3.26% protein, 4.65% lactose, TBC of 16 and SCC of 210.

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Apart from Aurivo with its bonus, the prices paid by the main NI milk buyers for supplies at those specifications were all within a tight band ranging from 34.29p/l down to 33.55p/l.

Glanbia Milk, Ballyrashane Co-op ‘Red Tractor’ and Fane Valley Co-op paid over 34p/l.

All buyers held their base prices for February at the same level as January. This left the February prices similar to the January ones for milk across a range of qualities (Table 1) from two different sizes of producer (Tables 2 and 3). The exception is Donegal/Aurivo Co-op’s prices, with the 2p/l bonus putting its price at the top across all categories of milk in these comparisons.

The bottom price paid for the average quality milk in NI from the smaller producer (350,000 litres per year) was 3p/l above the price paid by First Milk Co-op in Britain for milk of the same quality offered under the same conditions from a producer of that volume. For milk from the larger producer (one million litres per year), the price gap was just under 2p/l. These prices are after deduction of the transport charges.

First Milk pays more for milk bought on tightly specified supply contracts. Prices paid by many other buyers of milk in Britain are higher than the prices paid by First Milk.

The league table and other price tables published here do not include any of the retrospective payment offered by Ballyrashane on the previous 12 months milk supply, nor other incentives paid by some milk buyers during the recent and current phase of recruitment of milk suppliers by processors.

In all cases, the prices published here are derived from the officially quoted prices payable by the named buyers.

But it is known that amid current competition to ‘sign up’ suppliers, some milk buyers have been offering incentives to farmers.

Irish Farmers Journal sources indicate that interest-free loans have been made available to some farmers by Fane Valley Co-op, with the sums advanced to farmers generally related to the equivalent of one month’s milk payment but negotiable.

There are also reports of ‘signing on payments’ – it’s not Premier League football but the payments have allegedly run to five figures. In some cases, milk buyers have advanced the money required to pay the penalty that applies to anyone quitting a supply contract with United Dairy Farmers without giving 12 months notice.

More recently, it is being claimed that producers coming to Fane Valley from other buyers, who don’t operate a notice period penalty, have been offered financial incentives equivalent to the penalty payment (but this is negotiable).

Haulier transfers to Fane Valley

The most unexpected recent deal under which a number of milk producers in the Ards Peninsula switched their supplies from Town of Monaghan Co-op to Fane Valley involved the haulier of milk from those farms also switching to work for Fane Valley as part of the ‘signing’ of these suppliers. This appears to have been carried out with careful co-ordination, as all of the producers switched their supply to Fane Valley on the same day.

The move by the producers was made easier by the fact that Town of Monaghan Co-op does not operate any notice period for suppliers quitting – most have no written contract.

Meanwhile, Lakeland Dairies has been openly advertising for new suppliers and Aurivo/Donegal is competing strongly for milk in NI. This contrasts starkly with the terms under which Aurivo Co-op is operating in the Republic of Ireland, where the members are being asked to sign three-year supply contracts and invest in a ‘rolling capital fund’ to help finance the business. There is no indication of Aurivo’s NI suppliers being asked to contribute to the capital funding of the co-op or becoming members of the co-op.

Changing shares of milk purchased

Since the entry of Fane Valley Co-op and Ballyrashane Co-op into the business of direct purchase of ex-farm milk, there have been changes in the share of the available milk that each buyer collects. We have updated our estimates of the market shares in the right hand column of the February league.

Bearing in mind that Fane Valley and Ballyrashane were previously sourcing their milk through United Dairy Farmers, the main decline in volume purchased is at United.

But Town of Monaghan has also lost around 100 suppliers, mostly to Fane Valley. At the same time, Lakeland Dairies has built up its volume with the addition of some relatively large producers. Some further adjustment may be required after 1 April, the date on which notices by some members to quit United Dairy Farmers will be either ripped up or acted upon.

After that, it is anticipated that the current aggressive campaigning for milk will ease off – and that there may be a reduction in prices for milk. But the indications are that it won’t be a sharp drop.

Lakeland and Fivemiletown

The word in local dairy trade circles is that Michael Hanley, chief executive of Lakeland Dairies, was meeting the board of Fivemiletown Co-op this week. This adds to the speculation we reported last month about the possible takeover of the Fivemiletown business.

Prices calculated as ‘rolling averages’ over the 12 months from March 2013 to February 2014 are up on those of the rolling 12 months to January. The biggest risers are Ballyrashane Co-op and United/Dale Farm, as their February 2014 prices were 6p/litre higher than those of February 2013.

Glanbia Milk also gained some ranking places with their February price lift of 5.5p/l, while most of the other buyers lifted their prices by 5p/l. The exception was Lakeland Dairies, up by 4.5p/l on the February 2013 level.

However, Lakeland’s prices over the 12 months for ‘average quality’ milk were still top ranking for supplies from both sizes of producer in these comparisons. Their rolling average price paid to the producer of one million litres per year was over 33p/l.

All of the other rolling average prices were within 1p/l of Lakeland. These prices are after deduction of transport charges.

The prices paid by First Milk Co-op in Britain for comparable milk bought under the same conditions were below Northern Ireland milk prices by between 3p and 4p/litre. Other prices paid by First Milk on level delivery contracts or other specialised contracts are higher than the prices quoted here. Most other milk buyers in Britain pay more than First Milk.

The prices in Tables A and B are ‘weighted’ prices, based on different volumes delivered each month in line with NI seasonality of production and milk compositional quality that varied from month to month during the year rather than a fixed quality standard every month.

Adjustments for hygienic quality can either push the Ballyrashane ‘Red Tractor’ milk price more than 0.5p/l above or drop it below the prices paid by United and/or the United prices for Dale Farm Red Tractor milk.

Aim for higher levels of protein and fat in milk

The importance of breeding cows that produce additional butterfat and protein components in milk has been emphasised at dairy industry conferences in recent days.

Speaking at an Ulster Bank seminar for the dairy sector this week, farm consultant Jason McMinn referred to clients who regularly receive around 3p/litre more than others for milk. He said that in a downturn of milk prices this can make a huge difference to farm viability. McMinn was talking about excellent butterfat at 4.3% and protein 3.35% versus lower levels of 3.7% fat and 3.1% protein. He said that while some people may claim to be able to lift components by particular feeding strategies, breeding is the main way to do it.

The seminar focused on dairying ‘confinement’ systems that involve cows being housed full-time or part-time. Examining figures from these systems, McMinn also highlighted the importance of maximising forage intake and making good quality silage to make more profit. He warned that with zero grazing it is even more important to measure and manage grass, as lower quality grass is quickly evident in the output of milk by the cows.

McMinn stressed the need for high quality management of cows in confined systems and said that more confinement means more output is needed to cover costs and each step towards a more confined system ‘‘raises the bar all the time’’.

Last week, United Dairy Farmers and Dale Farm Group chief executive David Dobbin said that the focus has to be on growing the solids content of milk rather than just the number of litres of liquid produced.

Dobbin said that we are likely soon to see more attention drawn to the fat and protein content of milk supplied. A large percentage of Dale Farm’s milk supply is being processed into cheese, so higher protein content is directly related to yield of product.

Other local processors who manufacture milk powders are in competition with New Zealand businesses handling milk with far higher solids content and using dryers with much greater scale of throughput.