IFA hopeful Lakeland's supply management scheme will have limited impact

The IFA has admitted that dairy farmers were initially "disturbed" by Lakeland Dairies new 'Milk Supply Management Scheme' but are hopeful it will have limited impact.

Lakeland Dairies is to introduce a number of adjustments to its milk procurement operations in relation to 'new' volumes of milk supplied from 2023 onwards, the co-operative announced this week.

Part of their plans will see any ‘new’ volumes of milk supplied during the peak period of April-June 2023, above the volume supplied in each of those months in 2021, receiving 4 cent per litre less than the monthly price.

Incentives will also be introduced to encourage increased milk production in off-peak months, including changes to the current lactose bonus scheme and the existing off-peak bonus scheme.

The context for the decision has been a more than doubling of the volume of milk supplied to Lakeland Dairies for processing in the last decade; particularly since 2015 when milk quotas were scrapped. Lakeland Dairies currently process over 2bn litres annually and have seemingly reached capacity during peak season, describing it as "particularly challenging". They also referenced "projections" where a large proportion of suppliers indicated they would like to supply additional milk in the years ahead.

The IFA suspects expansion for most dairy farmers has ceased.

"Initially farmers were shocked - they weren't expecting it," Seamus Dolan, the national dairy committee vice chairman told the Celt. "It possibly won't affect that may farmers because the expansion mode is nearly finished, we have an environmental issue coming down the road with nitrates and carbon taxes, so farmers may have to reduce stock numbers - so their expansion could be done.

"It will affect a number of farmers where, maybe their son or daughter is in ag college and are coming home to farm - and there has been no expansion mode on the farm until the next year or so - it probably will affect them.

"Farmers who are in the middle of expansion, there is an appeals committee formed and that will examine farmers case by case, and we would be hopeful they will get allocations to satisfy their needs."

He said he anticipates a "fairly sympathetic" response from the appeals process if someone is in the middle of an expansion plan.

Mr Dolan also noted input costs may also see farmers reduce or cap stock.

"Costs are very high at the moment - farmers possibly won't push out the extra milk this year because of the high costs. You have the costs of fertiliser, cost of feed - and the concern that maybe grain will not be available," explained the Ballyconnell man.

The reference year is based on April-June 2021, so he anticipates that farmers will generally not have increased massively in the last year.

"There will be a certain number of people not happy about it," he acknowledges, "but we have to see what comes out of this Food Vision."

Food Vision is the government report due out today, which will make recommendations aimed at stabilising the national dairy herd.

The 'Milk Supply Management Scheme' will be put in place for five years from 2023 inclusive, and it will be subject to a mid-term review after the 2025 peak production season.

Lakeland Dairies’ Chair, Niall Matthews said, “This initiative supports the principles of sustainable production including the potential for continuing growth, while providing an appropriate level of balance between milk supply, processing capacity and flexibility in meeting market needs. It includes incentivisation for new off peak milk production and ultimately puts in place a framework that will see continuing progress and development in the interests of dairy farmers.”

Lakeland Dairies Group CEO, Michael Hanley said, “Our current processing scale and footprint provides considerable flexibility to direct milk into product areas yielding the best returns from the markets at any given time. Recent supplier information suggests that there is further scope to increase milk volumes. We are making these adjustments now to ensure a well-structured response to these projections and, if necessary in the future, we will invest in further capacity. This will be kept under constant review.”