Lakeland Dairies has announced a new payment system for milk suppliers in Northern Ireland which it says will encourage suppliers to produce milk with higher protein and butterfat content.

The new system offers Northern Irish suppliers an "equal opportunity" to benefit from enhanced payments for increased constituents over current levels, the processor said.

"In the first instance it will ensure stability and fairness for all Lakeland Dairies milk suppliers in Northern Ireland, as it will not impact any supplier’s base payments going forward," according to Lakeland.

The move will see suppliers who wish to focus on increasing milk solids receive additional payments in line with the future increased levels of protein and butterfat they are able to supply.

Each milk supplier in Northern Ireland will be able to choose a base year from either of 2018, 2019 or 2020, as an average benchmark, from which milk supplies in January 2022 and onwards will then be priced on both a base level and also with regard to subsequently increased milk solids for additional payments.

After each Northern Ireland supplier selects a preferred benchmark year, they will be allocated a monthly milk constituent base figure, for each of the 12 months of that year. The actual milk supplied from January 2022 onwards will then be paid relative to this base figure for constituents.

For all new milk solids produced by any supplier above their chosen base constituents level, an enhanced payment will be paid for each new unit of butterfat and protein supplied.

The enhanced payments per unit of constituents will be 0.029p/L for every 0.01% of extra fat and 0.05p/L for every 0.01% of extra protein produced. All other existing milk payment elements will remain as they are currently, according to the processor.

Lakeland is highlighting that the new system will not impact negatively on any suppliers' current payments; and also does not require the existing payment base to be increased to create a payment fund.

The enhanced milk payment system will instead be funded by the extra revenue generated from the extra fat and protein sold in the dairy market.

Commenting on these changes, Niall Matthews, chairperson of Lakeland Dairies, said: "[Our] consistent policy is at all times to pay our milk suppliers the highest possible milk price in line with market conditions.

"The feedback we have received from our milk suppliers, given the existing range of milk solids currently supplied, is that they would generally favour a system of this type.

"This will incentivise and reward the production of extra solids, while ensuring that the highest possible base price will continue to be paid to all milk suppliers in line with market conditions," Matthews argued.

He concluded: "This is a positive development and we are pleased to introduce this new system for our [Northern Irish] milk producers from January 2022 onwards."

Lakeland said it will be contacting milk suppliers directly with information on the new system.