We often talk about milk price, but how well do we understand it? Agriland is launching a Farmgate Milk Table for the Irish dairy industry. This monthly table aims to be the most transparent source of base price milk information in Ireland.
In this pricing table you will see:
- We are only publishing base milk prices for Irish co-ops utilising A+B-C milk pricing systems.
- In keeping with international standards, the Agriland Farmgate Milk Table will utilise more up to date Butterfat and Protein Standards of 3.90% and 3.35% respectively. The dairy industry has long moved beyond having a 3.6% Butterfat and 3.3% Protein average. In fact the last time this out-dated standard applied was 1997.
- 85% of Irish milk is exported in dairy products. Accordingly, we are also including prices from key milk producing regions and markets. These prices represent over 25% of the world’s milk pool.
Presently, the Agriland Farmgate Milk Table does not include milk quality bonuses. Rather it highlights the constituent values that the majority of co-op farmer members are paid. We hope this table will help farmers better understand what drives the value of milk, namely the constituent value.
Another key factor in milk price is the processing charge. For example, Arla’s Denmark’s constituent values place them well down the classification. However when you factor in Arla’s “-C” of <1.5 cents per litre, you realise that their price per litre exceeds all other Irish co-ops. Equally so with Lakeland and Arrabawn co-op. Even though they appear in the bottom half of the table on a constituent basis, their favourable “-C” costs place them 3rd and 5th respectively on a cent per litre basis.
A third, and very important aspect of milk price is value that quality can have on the milk price. We hope to tackle this key feature of milk pricing in the weeks to come.
There is a lot of change happening in how our international competitors price milk. Since January of this year, FrieslandCampina have moved away from an A + B – C system to a payment system in which they will pay for Fat + Protein + Lactose. FrieslandCampina state:
“With the abolition of the milk quota at the beginning of 2015, the present system in which fat and protein play a dominant role is no longer fully in line with current market demands…. Lactose is of prime importance for the production of infant and toddler nutrition, one of FrieslandCampina’s key growth categories”.
Ireland proudly boasts >10% of the world’s infant formula production. Lactose is a key ingredient in its production. The graph below illustrates how lactose imports into Ireland have skyrocketed in recent years. Lactose imports have more than trebled from <13,000 tonnes in 2007 to 47,050 tonnes for the first 11 months in 2013 alone. The value of these imports has increased from €23.5 million in 2010, to €75.2 million for the first 11 months of 2013, a threefold increase. The currently level of imports equate to a milk equivalent of one billion litres per annum. >80% of these imports originated from Germany and the Netherlands. Other European co-ops are also focusing on extracting more value from Lactose. Arla Foods, Denmark announced in September of last year that they plan to invest €120m on a new 85,000 lactose plant next to their “Denmark Protein” whey processing plant in Denmark.
A first step towards understanding the complexities of the international global dairy market is for Irish dairy farmers to better understand milk prices. Within Agriland we aim to help farmers better appreciate the nuances and complexities of milk pricing structures. We believe that the introduction of this Farmgate Milk Pricing Table is a helpful step in this direction.
Agriland Farmgate Milk Price Table Nov-13
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NotesWith the exception of the IFCN and Russian Farmgate prices, all prices in the table above have been calculated to reflect Irish Milk constituents of 3.9% Butterfat and 3.35% protein. Click here for further explanatory notes Aurivo Milk Price
- Prices Listed on Aurivo November Milk Statement – Protein: 7.546 / Butterfat: 4.480. Modified Price Used for Agriland Farm Gate Milk Price Table – Protein: €7.329 per kg / Butterfat: €4.351 per kg. With the exception of Aurivo, many Irish co-ops are calculating A + B – C prices on the basis of: ((Protein Content % * Protein € per kg) + (Fat Content % * Fat € per kg)) to give a cent per kg milk price. This result is typically converted into a cent per litre price by multiplying it by a mass density factor of 1.297. Aurivo seems to be an exception to this. On their milk statements, neither the protein or fat is stated in “€ per kg”, and the listed price is multiplied by the respective protein / fat contents directly into cent per litres without using the Mass Density Factor Conversion of “1.0297”. Consequently, Agriland has adjusted the Aurivo prices as printed on the statement by this “Mass Density Factor” in order for the price to reflect the standard industry practice.
- Prices Listed on Arrabawn November Milk Statement – Protein: €7.50318 per kg. Modified Price Used for Agriland Farm Gate Milk Price Table – Protein: €8.4732. Arrabawn price and bonus structure differs somewhat from the other co-ops, as their bonuses come into play at a higher ceiling than the national averages. A TBC bonus of 37.5¢ per kg of protein applies at <50,000 monthly average (national average, ~20,000). The co-op also pays the following standards on top of the base Protein Price: 29.5¢ per kg of Protein for farms that are compliant under Irish legislation S.I No. 853 of 2004, 22.5¢ per kg of protein for shareholder status, and 8.50¢ per kg as a year end deferral. These figures total 97.00¢ per kg of protein and are added to the base protein price.
- Kerry also includes 0.33 cents per litre “Temperature” Bonus. We have incorporated this into the price into the € per 100kg price.
- The table above shows the Arla A + B – C price. This price does not include shareholder and patronage associated bonuses. Nor does this price include the maximum attainable Arla milk standards quality bonuses of 0.118 Danish Kroner per kg of milk (~2¢ per litre)
- FrieslandCampina utilize an A + B – C Farmgate Milk Pricing System. As we get to January 2014 milk pricing you will see the FrieslandCampina pricing move to a A + B + Lactose system. We have not included the “– C” charge on FrieslandCampina’s November price, as we wish to draw farmers attention to the changes that will come in their January prices.
- The Fonterra Farmgate Milk Price includes the Forecast Farmgate Milk Price (NZ$8.30) plus the estimated full-year dividend (NZ$0.10). Fonterra also utilize an A + B – C Farmgate Milk Pricing System. Within Fonterra the volume adjustment (-C) depends on the solids in your milk. This is a zero sum calculation. In other words, farmers whose milk solids are higher than the average will receive a bonus, while those with lower than average solids will be deducted a transport cost. Both the average solids targets and volume adjustment price are set periodically. The volume adjustment penalty in recent years equated to about Euro 1.8¢. However, as Fonterra have a cost neutral system we have presented the “– C” figure in our table as zero.