With LacPatrick co-op being 3.5p/l off the top prices paid in NI for October milk, after it decided to cut base price by 1p/l to 26.5p/l and opted not to pay a winter bonus, the first significant cracks have started to appear in its milk pool.

Suppliers, with a combined total of around 12m litres, are expected to leave for other milk buyers by the end of the week, although this figure could end up closer to 20m litres – depending on what agreements are done in the days ahead.

Even at the higher figure, it is still only around 4% of the total milk pool (estimated at 500m litres), so not a major issue in the short term. However, of more concern is the number of producers who have been contacting other milk buyers in recent days to discuss a possible switch.

It is understood that about 50% of the LacPatrick milk pool in NI does not operate with a contract and can move without notice. There are also approximately 30 suppliers who do have a contract, but have served a notice to leave at the end of the year.

Reports suggest that Aurivo, Glanbia Cheese and Dale Farm have all agreed to take on new suppliers from Saturday (1 December).

Dale Farm is definitely taking on two new 1m-litre suppliers, but this could increase significantly by the weekend.

Among those moving to Aurivo is the son of Ulster Farmers’ Union deputy president Victor Chestnutt. When contacted by the Irish Farmers Journal, Chestnutt was clear that it was his son’s decision, not his.

“My son is head of the dairy business. It was his decision and what he thinks is best for him going forward. I have no insight, more than anyone else, into what is happening at LacPatrick,” he said.

With some producers deciding to leave now, it increases the pressure on the LacPatrick board to try to pay a price for November milk that is closer in line with the other main players. However, the co-op is in a difficult position, having been loss-making for much of the year, and with reports that Danske Bank is unwilling to allow any further extension of the co-op’s debt.

The situation has also been complicated by an initial enforcement order placed on the company by the UK competition and markets authority (CMA) last Friday. The proposed merger with Lakeland was notified to competition authorities, either side of the Irish border, after the respective shareholder votes at the end of October. However, in the days after the shareholder votes, payments to LacPatrick staff and suppliers were delayed 24 hours after Danske sought assurances around its debt. It is understood that Lakeland moved to inject cash into the business, including by buying some stocks off LacPatrick.

The enforcement order effectively stops this happening again, and makes it very clear that both co-ops must operate as separate entities until the merger is approved. That process is expected to be complete in the early new year, and should not be delayed by this enforcement notice. But either way, LacPatrick has at least another three months of milk to pay for, and is effectively in a position where it can only return to suppliers what it can afford. Stopping a run on the milk pool over that period is now an immediate priority.