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Dairy processors in NI need to change the milk pricing system to help grow the value of the NI milk pool, according to local consultant Jason McMinn.
Speaking at an event before the Winter Fair, McMinn presented figures which showed that milk pricing based on solids has helped increase the value of Republic of Ireland (ROI) milk pool by 7.3% since 2009.
Last year, average butterfat and protein levels in ROI stood at 4.10% and 3.58% respectively, up from 3.83% and 3.33% in 2009.
McMinn said that by better incentivising NI farmers to produce milk with higher butterfat and protein content, the value of each litre of milk for processing would gradually grow. That would also create significant savings for the industry, both in terms of less water being moved in milk tankers, and less water being removed in processing.
We just haven’t been concentrating hard enough on it [butterfat and protein], and that is impacting on our milk price
He maintained that under the current NI milk pricing structure, where incremental bonuses are available for fat and protein, high-solids milk is undervalued once base price is over 20p/l. He added that volume bonuses also take away from the incentive to produce milk with better components.
“We just haven’t been concentrating hard enough on it [butterfat and protein], and that is impacting on our milk price,” McMinn said at the NI Institute of Agricultural Science event.
He presented figures which showed that NI had the lowest milk price on a cents-per-litre basis, and the lowest butterfat and protein levels across a range of European regions last year.
The NI average was 32.47c/l from 4.03% fat and 3.28% protein.
It compared to 36.22c/l, 4.38% fat and 3.52% protein in Holland and 39.51c/l, 4.24% fat and 3.57% protein in Denmark. However, when prices are expressed on a cents-per-kg-of-solids basis, the NI price (because solids are so low) is actually closely aligned with many European countries.
Silage-based
McMinn maintained that cows on grass and silage-based diets were capable of delivering high component milk and he added that it was not just cross bred or low input cows that can produce high solids milk. He also doesn’t believe that a move to a solids payment would encourage more NI farmers into spring calving systems.
“Even Holstein herds in the south are putting in very good fat and protein.
“A lot of the ones that I talk to down there aren’t struggling the same way that we are, and it all comes down to milk price,” he said.
There is a fear of change, but it would be good for everybody because the incentive will be there for everybody to move forward
With over 80% of NI milk processed into products such as cheese, butter and milk powder, the issue of changing to a payment system based on milk solids has been discussed before.
But what has been the barrier to this change?
“Half your milk pool thinks it great, and the other half thinks it’s bad, that’s the problem,” McMinn said.
“There is a fear of change, but it would be good for everybody because the incentive will be there for everybody to move forward,” he added.
The breakeven milk price on the NI dairy farms that are clients of Jason McMinn’s Farmgate Consultancy currently stands at 27.8p/l.
The largest variable cost on his client’s farms is feed, which equates to 9.9p/l, followed by heifer rearing costs at 4.9p/l.
When overhead costs of 7.5p/l, drawings and tax of 2.4p/l and loan repayments of 4.2p/l are added to variable costs, average production costs total 30.1p/l. However, once direct payments worth 2.3p/l are deducted, it leaves the figure at 27.8p/l.
TB can drive breakeven costs up by 4p/l
“For a lot of people, profit wouldn’t be much more than their Basic Payment at the minute,” McMinn said.
The Farmgate Consultancy figures are based on 84 NI dairy herds with at an average size of 250 cows.
High tax bills in January 2019 affected breakeven milk price and disease outbreaks can significantly increase costs on dairy farms.
“TB can drive breakeven costs up by 4p/l,” McMinn said.
He presented graphs which showed strong correlations between breakeven milk price and factors such as forage intake, mortality rate and combined butterfat and protein percentage. McMinn said that there is no trend between herd size and breakeven milk price on his client’s farms.
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