Lakeland Dairies has announced adjustments to its milk procurement operations in relation to new volumes of milk.
The measures will impact Lakeland’s suppliers in the Republic of Ireland and Northern Ireland (NI).
It will apply to both existing suppliers and new entrants from 2023 onwards, the cooperative has announced.
A ‘new milk’ supply management scheme will support a continuing balance of processing capacity and milk supply, particularly in the peak milk production months, the co-op has said.
Incentives will also be introduced to encourage increased milk production in off-peak months, including changes to the current lactose bonus scheme and the existing off-peak bonus scheme.
The scheme will help to ensure appropriate flexibility in plant utilisation, in line with market demands, and will underpin long-term sustainability for dairy farmers across their current and future milk production outputs, according to Lakeland.
The scheme will be put in place for five years from 2023 inclusive, and it will be subject to a mid-term review after the 2025 peak production season.
How will Lakeland suppliers be affected?
From 2023 onwards, any ‘new’ volumes of milk supplied during April, May and June above a base peak reference volume will be paid 4c/L less than the price set for each of those months.
The base peak reference volume for the scheme will be the volumes supplied in April, May and June 2021.
For NI suppliers any ‘new’ volumes of milk supplied during April, May and June above a base peak reference volume will be paid 3p/L less than the price set for each of those months.
This ultimately means that farmers who exceed their allocation will receive a lower base price for the excess milk.
But from 2023 onwards any ‘new’ volumes of milk supplied in January above a base off-peak reference volume will qualify for a 4c/L bonus above the pertaining monthly price.
The base off-peak reference volume for the scheme will be the volume supplied in January 2021.
For NI suppliers the base off-peak reference volume for the scheme will be the volume supplied in October 2021.
An increase supply in volume for this month will allow farmers to qualify for a 3p/L bonus above the set monthly price.
New entrants
As part of these measures, Lakeland has announced that there will be no new entrants commencing in 2023.
New entrants wishing to commence supply in 2024 and thereafter will be required to go through an application process.
The co-op has also announced that new entrants who commence supply in 2024 or later, and each year thereafter for the duration of the scheme, will be paid at the pertaining monthly price, less 4c/L (3p/L for NI suppliers) – for the three peak months of April, May and June.
All milk supplied in January by a new entrant in 2024 will qualify for the 4c/L bonus, while all milk supplied by new entrants in NI for the month of October will qualify for a 3p/L bonus.
Peak milk
In a statement the Lakeland Dairies said: “Over the past decade, the volume of milk supplied to Lakeland Dairies for processing has more than doubled to a current level of over 2 billion litres annually.
“In that time, the cooperative has invested over €200 million in new processing capacity to cater for milk supply growth, achieving economies of scale and ensuring the processing of all milk.
“With ongoing growth in milk supplies, the peak milk production period (April, May, June) is particularly challenging for processors on an annual basis.
“The scheme takes into account projections where a large proportion of Lakeland Dairies’ milk suppliers have indicated they would like to supply additional milk to the cooperative in the years ahead,” the statement continues.
Under the scheme, adjustments will be made to milk price payments for any new milk received in each of the peak months of April, May, June from 2023 (only for new milk above a 2021 base reference year).
“All existing milk volumes will be paid at the pertaining monthly market rate. Bonus incentives are also being put in place for off-peak milk production,” the processor said.