This is a subscriber-only article
For more than two decades, our monthly milk league has provided local dairy farmers with independent price analysis across all processors.
However, in the last two years, there has been a multitude of changes to the way dairy processors pay for milk, mainly introduced to incentivise producers to increase milk solids, with higher premiums offered for butterfat and protein.
The higher incentives are having some impact, with statistics recorded by DAERA showing butterfat averaged 4.16% in 2022, up from 4.11% in the previous year. Protein has also been trending upwards, but at a more modest rate.
While the majority of the changes are straightforward, others are less clear cut, which means the base price reported by a processor each month is only an initial starting point when it comes to analysing prices. Ultimately, the whole process of comparing milk prices at farm level is less transparent than it was.
As a result, we receive regular queries about what is included, and excluded, when calculating our monthly milk league analysis.
NI average
The main analysis is based on a dairy farmer producing 750,000 litres per annum, which is in line with the average dairy farm in NI.
Monthly volumes are based on the NI supply curve and calculated back to farm level. For instance, NI milk production hits peak levels during May with around 9.8% of annual supply delivered.
In the case of a 750,000 litre producer, 9.8% of annual yield will see the farmer supply approximately 73,500 litres of milk during May.
Standard solids
Milk solids are also standardised in the main analysis, as this allows a fair comparison across all processors, with the figures used being official statistics recorded by DAERA across butterfat, protein and cell count for the same month in the previous year.
Adjustments made for milk solids, cell counts and volume, are per the official pricing framework published by each processor.
Other bonuses
There will be farmers on revised, or improved, bonus payments for set time periods, either as part of their contract as a new entrant or after switching processors. These payments are excluded from the milk league. Bonus payments are only included where the vast majority of suppliers receive them, for example, the Glanbia Cheese 0.4p/l mozzarella bonus.
There are also bonus payments included in our analysis which are not made monthly, but are issued as standard at the end of each processing year, eg the Dale Farm producer rebate.
Collection charges
Dale Farm is also the only company that continues to charge for collection across the entirety of its supply base, so this is reflected in our calculations. There are some Aurivo suppliers still charged for collection, but the vast majority are not, and as a result, no deductions are made for transport in the Aurivo calculations.
Excluded
One premium that we do not include in our main calculations is the Lakeland Dairies five-year scheme to encourage higher fat and protein, which started from 1 January 2022.
Under this initiative, farmers selected a reference year between 2018 and 2020 for both constituents, and for every 0.01% increment increase on fat and protein over their reference figures, the supplier receives a higher payment rate.
The payout under the scheme is not consistent across suppliers, and if we were to include it in our main league analysis it would require a series of unsatisfactory assumptions to be made.
Therefore, the Lakeland price continues to be calculated under its conventional increment pricing structure, which has been in place for a number of years. However, we do include an allowance for the milk solids incentive scheme in the actual co-op’s payout for the month, shown in Figure 1.
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