Tirlán has announced changes to its milk production bonus, more commonly referred to as a volume bonus.

Traditionally, Tirlán has paid suppliers a fixed premium for meeting certain yield thresholds on a rolling annual basis.

Payments started at 0.25p/l for farmers supplying 500,000l up to 1m litres, increasing to 0.5p/l for annual supplies greater than the 1m-litre threshold.

Changes

As the co-op moves its NI milk pool onto a 100% A+B-C milk pricing model in 2025, the new production bonus will initially apply to the January 2025 milk statement.

Rather than paying solely on a rolling 12-month yield, Tirlán will pay its new premiums on a combined kilograms of butterfat and protein.

Payment rates

The co-op is also increasing the number of threshold bands where such bonuses apply from two to six.

The first band pays 0.25p/kg if a farmer supplies between 25,000kg and 50,000kg of butterfat and protein over a rolling 12-month period.

From 50,000 to 100,000kg, a 0.5p/kg premium is available, rising to 0.70p/kg for 100,000kg to 200,000kg, 1.5p/kg for 200,000kg to 350,000kg, 1.8p/kg for 350,000 to 500,000kg and a 2p/kg premium for those supplying above the 500,000kg mark.

Value

To calculate what the new payments are worth to the typical dairy herd in NI, our analysis is based on a farmer supplying 750,000 litres at 4.19% butterfat and 3.31% protein.

Under the old payment model, the farmer would have been paid a volume bonus of 0.25p/l, worth £1,875 annually.

Under the new payment model, the example farmer is producing 772,500kg of milk annually which, at the outlined fat and protein, equates to 57,938kg of milk solids.

As a result, the example farmer will receive a 0.5p/kg bonus payment on the combined rolling butterfat and protein.

This works out at an additional £3,476 per year in milk sales, which is approximately £1,600 more than the old volume bonus based on litres.

Focus

If the farmer wants to increase the value of the production bonus, the options are to either increase yield or produce milk with greater fat and protein.

Assuming annual yield is increased to 1m litres, but butterfat and protein are unchanged at 4.19% and 3.31%, a 0.5p/kg bonus is then payable on the combined solids output and is worth £4,635 annually.

If yields remain on 750,000l, but solids increase to 4.35% butterfat and 3.35% protein, the farmer is also paid at the 0.5p/kg threshold, with the payment worth £3,568 in annual milk sales.

To move up into the next payment band above 100,000kg, the example farmer would need to increase annual yield to around 1.2m litres at 4.55% butterfat and 3.5% protein.

Tirlán states that the new production bonus is designed to benefit farmers that are focused on increasing milk solids, as well as suppliers that prefer to increase annual yields.