Lakeland Dairies has issued letters concerning “adjustments” to its milk procurement operations to its suppliers.
It is making several changes in relation to new volumes of milk incoming to the co-operative in the years ahead, from 2023 onwards.
‘New milk’ supply management scheme
Its ‘new milk’ supply management scheme will support a continuing balance of processing capacity and milk supply, particularly in the peak milk production months.
The processor will introduce incentives to encourage increased milk production in off-peak months. This will also include changes to the current lactose bonus scheme and the existing off-peak bonus scheme.
Over the past ten years, the volume of milk supplied to Lakeland Dairies for processing has more than doubled to a current level of over 2bn litres annually.
In that time, the co-operative has invested over €200m in a new processing capacity to cater for growth.
It hopes that its supply management scheme for new milk will:
- Support a continuing balance of processing capacity and milk supply, particularly in the peak milk production months;
- Enable sustainable growth in milk supplies in the years ahead;
- Help to ensure appropriate flexibility in plant utilisation, in line with market demands;
- Underpin long term sustainability for dairy farmers across their current and future milk production outputs.
With ongoing growth in milk supplies, a spokesperson said the peak milk production period (April, May, June) is “particularly challenging” for processors annually.
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 co-operative in the years ahead.
It will implement the scheme for five years from 2023 inclusive. It will be subject to a mid-term review after the 2025 peak production season.
The co-operative will set 2021 as the base reference year for milk supplies.
Milk sources and payment rates
‘New milk’ at peak will come from existing milk suppliers and potentially from new entrants.
Under the scheme, it will make adjustments 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).
It will pay all existing milk volumes at the pertaining monthly market rate. Furthermore, it is putting bonus incentives in place for off-peak milk production.
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