Lakeland Dairies to introduce milk procurement adjustments in 2023

From next year, Lakeland Dairies is introducing a number of adjustments to its milk procurement operations in relation to new milk supplies in the years ahead, as well as changes to the current volume bonus payments.
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A ‘New Milk Supply Management Scheme’ will support a continuing balance of processing capacity and milk supply, particularly in the peak milk production months.

Incentives will also be introduced to encourage increased milk production in off-peak months, including volume bonus adjustments.

From 2023 onwards the current volume bonus payments will be adjusted for particular months.

During the peak months of April, May and June the current Volume bonus payments will be reduced by 50 per cent.

During the months of September, October, November and December, the current volume bonus payments will be increased by 50 per cent. 
Over the past decade, the volume of milk supplied to Lakeland Dairies for processing has more than doubled to a current level of over two billion litres annually.

In that time, the co-operative has invested over £160 million in new processing capacity to cater for milk supply growth, achieving economies of scale and ensuring the processing of all milk.
The supply management scheme for ‘new milk’ is intended to support a continuing balance of processing capacity and milk supply, particularly in the peak milk production months, and to enable sustainable growth in milk supplies in the years ahead.

It will help to ensure appropriate flexibility in plant utilisation, in line with market demands, and to underpin long term sustainability for dairy farmers across their current and future milk production outputs.
With ongoing growth in milk supplies, the peak milk production period - April, May, June - is particularly challenging for processors on an annual basis.

The scheme takes into account projections where a large proportion of Lakeland Dairies’ milk suppliers have indicated they wish to supply additional milk to the co-operative in the years ahead.
The 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.

The co-operative will set 2021 as the base reference year for milk supplies.
New milk at peak will come from existing milk suppliers and potentially from new entrants.

Under the scheme, adjustments will be made 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).

All existing milk volumes will be paid at the pertaining monthly market rate.

Lakeland Dairies chair, Niall Matthews, commented: “As a farmer owned and farmer directed co-operative, serving the milk processing needs of over 3,200 farm families, Lakeland Dairies has always supported the growth, success and long-term sustainability of dairy farming and we will continue to do so at all times, now and into the future.

“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.

“It will initially be reviewed in 2025 to evaluate its effectiveness and contribution to the intended aims of the scheme and the wider co-operative.
Lakeland Dairies Group CEO, Michael Hanley, stated: “Lakeland Dairies has invested over £160m in new processing capacity over the past decade and has embraced industry consolidation including mergers and acquisitions, yielding many efficiencies and economies of scale.

“We are also continuing to invest in the optimisation of existing facilities.

“We’re now exporting to over 80 countries worldwide with long standing customer relationships in every continent.

“The milk management scheme for new milk is based on extensive milk planning projections, and the planned development of existing and new capacity, to maximise and enhance the excellent processing assets that are already available to us.
“All developments and initiatives by Lakeland Dairies will continue to be geared at maximising milk price for dairy farmers, consistent with the need for a continuing balance of processing capacity and milk supply, particularly in the peak milk production months.

“This, in time, should serve to further increase efficiencies and economies of scale in the long-term interests of milk producers.”

He continued: “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.”
Lakeland Dairies is the largest dairy processing co-operative on the island of Ireland, operating across 16 counties, north and south.

The farmer owned co-operative now has eight technologically advanced facilities, processing two billion litres of milk annually, supplied by 3,200 farm families, into a wide variety of dairy food ingredients, foodservice and consumer products which are exported worldwide.