This is a subscriber-only article
A 40% increase in prices paid for milk over the last 12 months means NI dairy processors are now effectively paying twice the amount for water than they were in May 2021.
Our calculations suggest that 12 months ago the value put on water in the average NI milk payment system was 10p/l. That figure stands at around 20p/l now.
Although some of the major milk processors have brought in new increments for fat and protein in the last year, the extra value attributed to milk solids is extremely moderate compared to the overall value of milk.
The clear signal being sent to NI suppliers is still to drive volume, not milk solids. A 7,000 litre cow producing the same milk solids as a 6,000 litre cow will gross around £200 more income annually under current payment systems in NI.
Dale Farm
From 1 April 2022 a new payment system kicked in at Dale Farm which is designed to encourage producers to supply higher solids milk over the next three years.
In the 12 months to March 2023, the value of each 0.01% butterfat increment above base increased from 0.022p/l to 0.025p/l, with the butterfat base going from 3.85% to 3.88%. The value of each protein increment has moved from 0.036p/l to 0.039p/l, with the base level rising from 3.18% to 3.20%.
If we go back to May 2021, Dale Farm were effectively valuing the fat and protein component of their milk at 20p/l (calculated by multiplying the fat and protein in a standard litre by the incremental value of each). With prices paid averaging around the 30p/l mark, it meant water was valued at 10p/l.
Under the new pricing system in place since April 2022, the value of fat and protein has increased to just over 22p/l, and at the end of a three-year transition, this increases to just under 28p/l.
With prices currently paid around 43p/l, the value put on water by Dale Farm in May 2022 has risen to nearly 21p/l.
Lakeland
It is a similar scenario at other milk processors. The majority of Lakeland’s milk pool in NI is bought using a payment system that continues to value fat and protein at 18.5p/l, so at current prices the co-op is putting a value on water of 24p/l.
Lakeland does have a new incentive scheme in place since 1 January 2022 that pays higher increments for additional fat and protein when compared to an individual supplier’s reference year (2018, 2019 or 2020). But even these new higher increments, paid on only a fraction of the milk pool, still value fat and protein at under 30p/l.
Glanbia
The other milk processor to announce changes to fat and protein increments in recent years is Glanbia Ireland. From 1 April 2021 it was effectively valuing fat and protein at 20p/l, moving to 23p/l from 1 April 2022, just over 26p/l from 1 April 2023, and over 29p/l from 1 April 2024.
Recent communication to Glanbia suppliers confirmed that the company does eventually intend to move suppliers in NI over to an A+B-C system, similar to that which exists in the Republic of Ireland.
SHARING OPTIONS: