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More than 50% of the milk produced in NI is purchased by processors headquartered in the Republic of Ireland (ROI).
Lakeland Dairies, Tirlán and Aurivo are the main Irish co-op’s that purchase NI milk, with around one third of the 2.5bn litres annually produced on NI farms travelling south of the border for processing.
Due to the importance of crossborder milk processing, a question regularly posed by farmers is do certain processors pay a higher price for milk on either side of the border?
The question is not straightforward to answer as there are many factors to take into account, not least the way milk is purchased in NI compared to the Republic of Ireland (ROI).
First off, the NI milk payment system is based on a standardised litre with a greater weighting on volume, rather than milk quality, although that trend is slowly changing.
In ROI, milk is paid under the A+B-C system, where A is the value of 1kg of protein, B is the value of 1kg of butterfat and C is a deduction for processing costs per kg.
Premiums
There are also various bonuses payable by co-ops, and often, they do not apply equally on opposite sides of the border.
For instance, in NI, there are significant premiums payable on monthly milk volumes that increase once certain thresholds are reached.
Those bonuses are not available in ROI, as volume is actively discouraged through the C element of the main payment system.
There are also incentives related to lower cell counts in NI that are not always available south of the border, as well as differences in winter milk bonuses. In ROI, there are also farmers on specific winter milk schemes.
The base price quoted each month is also based on different parameters. In NI, base price relates to butterfat produced at 3.85% to 3.90% with protein between 3.18% and 3.23%.
South of the border, base price is at a standard 3.60% butterfat and 3.30% protein, so adjustments are necessary to compare like with like.
There is also the issue of VAT, with Irish co-ops usually including the rebate, which effectively adds 5.4% to the official published price. Milk prices paid in NI exclude standard VAT.
Comparison
To look at how milk pricing compares between NI and ROI, our analysis uses relevant data from the three largest ROI based processors purchasing milk north of the border.
Prices have been calculated on a monthly basis from January to October 2023, as official November and December milk figures have yet to be published.
Calculating milk prices over a rolling 10 month period, rather than one individual month, allows for a fairer comparison as there is less chance of price being skewed by certain bonus payments.
Monthly volume is in line with the NI average dairy farm producing 750,000 litres annually, with milk quality taken from the average recorded by DAERA for the previous year.
Higher values
From our analysis across the three Irish co-ops, a typical NI dairy farmer received an average milk price of 34.44p/l from January to October 2023 – see Table A.
Using the same milk quality and volume figures, the example farmer would have received a slightly lower milk price of 33.92p/l in ROI over the same period.
Based on the volume of milk produced during the outlined 10 month period, it equates to an additional £3,400 in milk sales in 2023.
Within the individual processors, our analysis shows Tirlán and Aurivo paid slightly higher prices in NI than ROI.
In the case of Lakeland Dairies, its NI price was fractionally lower than the ROI equivalent with a differential of just 0.04p/l.
Trends
Across the three processors, ROI milk prices were slightly higher in January and February. But from March to July, NI prices were ahead, helped in part by volume bonuses.
Over the remainder of summer and autumn 2023, monthly milk prices paid by the three co-ops on both sides of the Irish border were broadly similar.
Higher solids
The exercise was replicated to take account of a farmer producing milk at higher milk solids. This time, the average monthly butterfat and protein recorded in ROI from January to October was used.
As shown in Table B, the price paid for this milk is slightly lower in NI than compared to ROI.
Over the 10-month period, the average price paid in NI would be 35.73p/l, but the same milk would realise 35.98p/l under the A+B-C system in ROI. Milk sales would have generated an extra £1,500 in ROI than NI.
While the exercise does highlight there are some small differences in price at a standardised milk quality and volume, it must be remembered that the analysis was specific to 2023 only and also specific to the three co-ops.
The calculations also reinforce the point that the payment system in ROI tends to better reward those farmers with high solids, when compared to the system that exists in NI.
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