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The decision by Lakeland Dairies to hold October base price at 27.25p/l has been the final straw for some NI suppliers, with reports that a small, but significant number have put in their notice to leave.
Irish Farmers Journal milk league analysis for October shows a 4.46p/l gap on price between NI’s two largest dairy co-ops, with Dale Farm out in front with a final price of 34.78p/l for milk produced at average solids, and once a 2p winter bonus is added in.
While Lakeland will close that gap for November supplies due to its 3p/l winter bonus, there is significant pressure on the board to also respond with a higher base price.
In recent months, our analysis shows Lakeland has fallen well behind Dale Farm.
Both processors started 2023 on relatively level pegging, once an allowance is made for transport costs at Dale Farm. But by April, the difference on base price widened to 1.55p/l and has since grown to 2.8p/l for the three months from August to October.
For a dairy farmer producing 750,000l of milk annually at the NI average for milk solids and volume, our calculations show that if they supply Dale Farm, total income across the first 10 months of 2023 comes to £224,691. If they supply Lakeland it is income of £213,138, a difference of £11,553.
Grievance
However, Lakeland suppliers who have contacted the Irish Farmers Journal, have also expressed annoyance at the changes made to supply agreements earlier this year.
From 1 June 2023, Lakeland suppliers without an official milk supply contract must serve a 12-month notice period should they wish to change milk processor. Failure to serve the notice means they risk losing all volume and winter bonus payments in the previous year.
Further disgruntlement emerged over the past fortnight, following the announcement of a new sustainability scheme, as only farmers with a milk supply agreement qualify for the new 0.5p/l payment.
Sites
There has also been some unease at the announcement last Thursday that Lakeland is to close three sites, although the co-op insists it is about improving operational efficiency and, ultimately, generating additional returns.
Included on the list is the site at Banbridge, which came as part of the deal to acquire the Fane Valley dairy business in 2016. It will close in June 2024 along with the milk drying facilities at Lough Egish in Co Monaghan, while the facility in Monaghan town will close by the first quarter of 2025. All sites are to be sold, with the co-op to invest in a new liquid plant at Killeshandra.
While the Irish liquid milk market has experienced significant rationalisation in recent years, sources in the trade maintain it is now delivering consistent returns.
“If you could put everything into liquid at present, you would,” commented one.
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