Strathroy Dairies has warned its suppliers in the Republic of Ireland that it may have to impose a price penalty on peak-season new milk from 2022 onwards.

In a communication to its 150 milk suppliers in the Republic of Ireland, the Omagh-based family-owned business has stated that processing limitations have forced it to make contingency plans

“We are proposing a two-tier milk price for the four peak months March to June,” the company wrote.

Suppliers will be able to choose months from each year to give the highest total delivered volume

Any milk above an 'agreed volume' “will receive whatever we can get from the market,” it continued.

The agreed volume will be based on the supply for each month from either 2020 or 2021.

Suppliers will be able to choose months from each year to give the highest total delivered volume (for example, March and May 2021 and April and June 2020).

Coming in the wake of Glanbia’s announcement, the Strathroy statement is unlikely to be the last such communication from a dairy processor to its suppliers.

The letter states that “processing capacity on the island has been stretched to the limit over the last three months”.

Strathroy says the volume of milk it has supplied to North Cork Creameries is below what was forecast, as North Cork experienced bigger than expected growth in its own supplies.

Strathroy is curently installing a dryer in Omagh.

"If needed, we will be able to process all our supplies without relying on other processors. However, any increase in our peak milk intake could create difficulties," the company said.

ROI milk only

None of the restrictions apply to milk from suppliers in Northern Ireland, Strathroy Dairy's Ruairi Cunningham confirmed to the Irish Farmers Journal.

“Milk supply in Northern Ireland is increasing, but more steadily than in the Republic of Ireland,” he said.

Cunningham stressed that these are contingency plans, and that Strathroy is optimistic it will be able to pay full price on all milk in the future.

After seven years, an element of trust has been built

“Peak deliveries have already passed from northern suppliers before the seasonal surge from grass-based farms in the Republic.”

Strathroy also revealed its intention to break the link between its base price and the Glanbia base price, introduced in 2014.

“After seven years, an element of trust has been built,” Cunningham said.

“We want to be more independent than to base our price by that of others.”

Strathroy’s 150 suppliers in the Republic of Ireland supply about 120m litres of milk annually. It recently declined new entrants, but says it will work with recent entrants and farmers who have had disease outbreaks in the reference months.

Liam Curtis, chair of the South East Milk Suppliers, which represents Strathroy suppliers, said farmers were concerned.

He noted the use of the word “proposals” and wants discussions between supplier representatives and Strathroy management to be held as soon as possible.

Noting the base price change, he observed that Strathroy’s price has been consistently more than the minimum 0.5c/l over Glanbia’s price through the years.