In the end, eight milk processors finished paying an average milk price of 58c /l excluding VAT in 2022.
This is the result when we tally the final numbers for 2022 milk price plus any unconditional bonuses on all 2022 supply announced by the various co-ops’ boards. This exercise is possible following the final move by Kerry last week to include a further top-up on 2022 milk price.
Drinagh Co-op – the biggest, but most remote of the west Cork co-ops, which processes all of its milk under the Carbery banner at Ballineen, finished out on top. It is followed very closely by near neighbours, Lisavaird Co-op.
North Cork Co-op and Tirlán, the largest milk processor in Ireland, come next. In 2022, both of these co-ops had a relatively significant proportion of their milk pool in fixed milk price schemes.
Our exercise only evaluates the variable milk price paid and does not take account of that part of the milk pool that was in fixed price contracts.
In 2022, the fixed milk price payout paid out a price far lower than the variable milk price but this lower price is not factored into this exercise. We know between 20% and 30% of the milk pool in both North Cork and Tirlán did not achieve anything near the milk price quoted in this exercise.
Other processors such as Dairygold and Kerry also had part of their milk pools in fixed milk price contracts, but not to the same extent in terms of volumes.
Any bonus money paid out for milk under a 200,000 cell count is also not included in these results. Any bonuses for trading with the co-op such as the schemes in the west Cork co-ops and Tirlán are also not included.
What is included in this exercise are milk price top-ups announced post the monthly milk price announcements. For example, by February 2023, Tirlán, Centenary Thurles, Dairygold, North Cork and Lakeland had announced a top-up on all 2022 milk supplies, a sort of a 13th payment. This varied between 0.6c/l and 1.5c/l.
Similarly, Kerry had announced a 0.6c/l top-up on all January to June 2022 milk supplies last year. It also paid a retrospective monthly top-up on August to December milk supply.
The move last week by Kerry was, in effect, a further top-up of the top-ups when it announced it would pay out 0.86c/l excluding VAT on all 2022 supplies.
In our previous exercise on annual milk price, computed independently by KPMG, only money that was paid out to the farmer was included in the calculation for annual average milk price.
It means we publish this content knowing full well that it’s not the full story as we don’t have visibility of the internal workings on milk price in the individual co-ops. However, in the absence of any other national exercise, it’s the best we can do.
The previous, more complete exercise finally fell when the west Cork co-ops’ directors decided not to participate in the annual milk price review because trading bonuses paid out to their suppliers were outside the scope of the exercise.
We met with the west Cork chairs on a number of occasions to explain the rationale and tease out alternatives, but ultimately their board directors decided against participation.
In the main the other co-ops had agreed to continue with the KPMG exercise if all co-ops were on board.
The simplicity of the previous KPMG exercise is highlighted in that only money paid out was counted in calculating the average price. So, the total money divided by the total litres delivered a comparable but fair price per litre.
The other important point to make is that milk price is only one guide on the performance of a business.
The investment in services for farmers, the investment in processing capacity, and importantly the financial returns and profits as described over the last number of weeks in the annual results also describe the health of a dairy processing business for the medium to long term.
The IFA and ICMSA publish annual milk price reviews (Figures 1 and 2). They both have certain criteria for inclusion and different benchmarks on scale, etc. Both include some, but not all of the 2022 milk price top-ups and the detail of the respective terms and conditions can be seen on both ifa.ie and icmsa.ie