North's largest milk buyer to move to solids-based payment structure
Cavan Dairies Lakeland Plant Colm Bailieboro, Picture: Photography Co Fennell Mahady, At
The largest buyer of Northern milk, Lakeland Dairies, has taken its first step in introducing a solids-based payment structure, similar to that used in the Republic of Ireland.
The new payment system, which will come into effect in the new year, aims to encourage Northern Irish suppliers to produce milk with higher protein and butterfat content.
The processor is the second of the 'Big Five' in the North to make such a move.
A spokesperson for Lakeland said: "The new system offers all suppliers an equal opportunity to benefit from enhanced payments for increased constituents over current levels.
"In the first instance, it will ensure stability and fairness for all Lakeland Dairies milk suppliers in Northern Ireland, as it will not impact any supplier’s base payments going forward, while enabling those who wish to focus on increasing milk solids to receive additional payments in line with the future increased levels of protein and butterfat they are able to supply."
However, the scheme has come under criticism from those with herds which already produce high levels of soilds, who say they will not be rewarded equally as their benchmark year will already have higher protein and butterfat levels.
The new structure allows each milk supplier based in NI to choose a base year from either 2018, 2019 or 2020, as an average benchmark, from which milk supplies in January 2022 and onwards will then be priced.
The amount paid will then be based on both a base level with bonuses for increased volumes of milk solids compares to the base year.
Suppliers will be allocated a monthly milk constituent base figure, for each of the 12 months of that year. The actual milk supplied from January 2022 onwards will then be paid relative to this base figure for constituents.
For all new milk solids produced by any supplier above their chosen base constituents level, an enhanced payment will be paid for each new unit of butterfat and protein supplied.
The enhanced payments per unit of constituents will be 0.029p per litre for every 0.01% of extra fat and 0.056p per litre for every 0.01% of extra protein produced.
All other existing milk payment elements remain as they are currently.
Lakeland Dairies claimed the new system will not impact negatively on any supplier’s current payments and does not require the existing payment base to be increased to create a payment fund as the enhanced milk payment system will be funded by the extra revenue generated from the extra fat and protein sold in the dairy markets.
Niall Matthews, chairman of Lakeland Dairies, said: “As a farmer-owned dairy co-operative, Lakeland Dairies’ consistent policy is at all times to pay our milk suppliers the highest possible milk price in line with market conditions.
"This will incentivise and reward the production of extra solids, while ensuring that the highest possible base price will continue to be paid to all milk suppliers in line with market conditions. This is a positive development and we are pleased to introduce this new system for our milk producers from January 2022 onwards.”
Earlier this year, Glanbia Ireland became the first of NI's major milk buyers to move suppliers to solids-based pricing by 2024.
High output herds with lower milk solids will likely benefit most from Lakeland's scheme, whereas, those with a higher base may find it harder to make further gains, meaning they may be better off with the Glanbia scheme.
Under Glanbia's previous payment scheme, the butterfat base level was set at 3.8-3.84%. However, the new pay structure saw that rise to 3.85%, going up to 3.90% by 2024. Every 0.01% above base will be paid at 0.021p per litre, rising to 0.03p per litre by 2024.
The protein base level previously was 3.15-3.19%. It will now increase to 3.20%, going up to 3.25% by 2024. Every 0.01% above base will be paid at 0.037p per litre, rising to 0.054p per litre by 2024.
The new Glanbia payment structure also includes volume bonuses for farmers supplying larger quantities, and incentives for lower bacteria counts, with anything above 50,000 penalised between 0.15p and 10p per litre and anything below 25,000 given a bonus of between 0.25p and 0.35p per litre.
Further adjustments will be made based on somatic cell count. Deductions of between 0.2p and 6p per litre will be made for SCC over 300,000, while cell counts of under 200,000 will be awarded bonuses of up to 0.4p per litre.
