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Within the past five years, milk processors in NI have introduced various financial incentives to encourage suppliers to produce milk with higher levels of butterfat and protein.
The biggest changes have occurred in the last three years with several processors changing the way they pay for milk in NI.
So far, these incentives appear to be having a positive effect at farm level as milk solids have been increasing year on year.
From January to September 2023, butterfat has averaged 4.15% with protein averaging 3.30%.
Based on current trends, milk quality is on track to finish the year at record highs with butterfat likely to average 4.18% and protein of 3.32%.
In 2022, butterfat averaged 4.16% with protein on 3.31%, while ten years ago the butterfat and protein averages were 4.02% and 3.25% respectively.
Incentives
Leprino Foods was the first processor to introduce a premium that rewarded suppliers for producing higher solids, with its mozzarella bonus back in 2018.
More recently, Tirlán, Dale Farm, Lakeland and Aurivo pay higher premiums for fat and protein, with some moves to penalise farmers that fail to make progress each year.
Tirlán has given the clearest signal of moving towards solids based payments as it transitions to an A+B-C system by January 2025.
Under the model, A is the value of 1kg of protein, B is 1kg of butterfat and C is a deduction based on the volume processed.
Milk price
As milk solids increase each year, has the extra fat and protein generated resulted in more money for dairy farmers?
To make a comparison on the value of the extra solids, our analysis is based on the average NI dairy farm supplying 750,000 litres.
Base price has been standardised at 30p/l to allow a direct comparison of butterfat and protein year on year.
Butterfat is set at 0.025p/l per 0.01% increment above a 3.85% base, with protein set at 0.035p/l per 0.01% increment over a 3.19% base – these assumptions effectively value the fat and protein in a standard litre at 21p/l over the past decade.
As DAERA statistics only provide data up to September 2023, our calculations are based on 12 month milk sales from October 2022 to September 2023.
For the outlined period, butterfat averaged 4.19% with protein on 3.32%.
The 12 month rolling milk sales come to £234,673 or 31.28p/l, excluding all premiums on volume, TBC and SCC.
Yearly comparison
Replicating this exercise on milk sold from October 2021 to September 2022, butterfat averaged 4.14% and protein 3.31%.
This brings milk sales for the outlined period to £233,353, which is £1,320 less than the 2023 figure.
Five years ago, butterfat averaged 4.03% with protein 3.27%, resulting in milk sales totalling £230,535, down £4,138 on the most recent supply year.
If we go back to 2013, yearly milk sales generated £229,406, a gap of £5,267 compared to the 2023 analysis.
Solids payments
The topic of paying more for milk solids always generates plenty of debate in NI, with farmers and processors making arguments for and against such moves.
However, the NI milk pool has also grown over the past decade, with individual cow yields increasing from 7,200l to around 7,800l per cow. It highlights that it is possible to increase both milk solids and yields, adding value to the milk sold each year.
Netherlands
To consider what is possible into the future it is worth comparing to performance in the Netherlands where high input, high output systems dominate, with individual cow yields approaching 9,000l. Yet butterfat has averaged 4.48% from October 2022 to September 2023 with protein averaging 3.59%.
If NI could replicate those milk solids percentages, our example farm would have milk sales of £247,420 in 2023, which is an additional £12,747 in income.
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