Strathroy Dairy’s director Cormac Cunningham has refuted suggestions that the company let Glanbia ‘take the heat’ on Ireland’s peak milk supply challenge, before going public with its own problems on the matter.
Strathroy has contacted its suppliers to inform them that there will be a risk to any additional milk produced next year, as the company manages increasing volume levels over the peak milk season.
In the letter, the Tyrone-based milk processor told supplier farmers that, although it is in the process of constructing a new dryer in Omagh, “any increase in our peak intake could create difficulties”.
However, it stressed that current supply levels are not an issue.
Speaking to Agriland Cormac Cunningham said:
“The issue for us first became apparent back in March. Extra volumes of milk started coming into Strathroy at that time. Glanbia went public with its own difficulties at the same time.
“We had arrangements to deal with the volumes of milk coming at us this year. But we felt that it was important to let our farmer-suppliers know, at this stage, of our plans for 2022 and beyond.”
Not telling farmers to restrict
According to the Strathroy director, the company is not telling suppliers to restrict plans they might have to increase milk output.
He explained: “What we are saying is that future milk produced above the levels registered this year during the months of March, April, May and June may have to be sold onto a distressed market, and the farmer price adjusted accordingly.
“Milk supplies up to the threshold level will be paid for at the agreed base price.
“It is only increased milk supplies that will be treated in this way. And it may turn out that prevailing market conditions will allow us to pay the full price for all the milk Strathroy receives during the period of peak supply.
“But such circumstances cannot be guaranteed.”
Northern Ireland milk suppliers
Cunningham also confirmed to Agriland that Strathroy is not imposing the new peak milk supply arrangements on its farmer suppliers in Northern Ireland.
“The production profile of our milk suppliers in Northern Ireland is essentially flat all year-round,” he explained.
“The issue relates solely to the production trends followed by dairy farmers in the Republic of Ireland, where the trend towards spring and summer milk output has been further accentuated over recent years.
“We are a liquid milk business; we need a steady flow of milk coming through to use every week of the year."
All-Ireland policy at Strathroy
Cunningham is keen to point out that Strathroy remains committed to an All-Ireland business policy.
“The problem is a direct result of there not being sufficient processing capacity on this island to deal with the volumes of milk coming off farms during the four months of peak supply.
“From our point of view, the problems we now face have been created on the back of the exceptional increases in milk output witnessed in the Republic of Ireland over recent years.
“This problem is magnified if plant breakdowns take place anywhere on the island.”
So how is Strathroy Dairy planning to deal with the surplus milk offered by its producers?
Cunningham said: “Step one is to pasteurise the milk. The cream is then removed and the resulting skimmed milk condensed down on site.
“This allows us to send the cream for butter production, with the concentrated skimmed milk sold to EU customers. There is no market for this product in Britain at the present time.
“The Northern Ireland Protocol allows us to sell the concentrated milk to European customers on a levy-free basis.
“For every four tankers of milk arriving at Omagh, one tanker of condensed milk subsequently leaves the Strathroy site," he added.
Strathroy milk drying plant
November of this year will see the completion of a milk drying plant at Strathroy Dairies.
“This will allow us gain entry into a range of other markets,” the Strathroy director confirmed.
“This is an example of Strathroy using its money to help solve the problems that now exist. Significantly, we are not asking our farmers to put their hands in their pockets in order to fund this investment," he continued.
Cunningham believes that the need to flatten Ireland’s milk production curve is obvious. In practical terms, this means producing more winter milk.
He said: “In our own case we have enough winter milk producers in the Republic of Ireland to meet our needs. And these farmers are well positioned to produce more winter milk, if required.”
Strathroy Dairy has 250 farmer suppliers on the island. Significantly, the company is confirming that it will not be taking on new suppliers.
“And we made this point very clear to our farmers in the follow-up to the letters that went out to them just over a week ago,” Cunningham stressed.
When asked how farmers reacted to the receipt of the letters, the Strathroy representative confirmed that most producers could see the rationale behind the decisions that had been taken.
He added: “We work very closely with all our suppliers. The new pricing arrangements kick-in next year. And these take full account of the growth in milk supplies secured by our farmers over the past 12 months.
“Agreed monthly volumes for each supplier will be the higher of their production in 2020 and 2021 e.g. a farmer supplying 60,000L in May 2020 and 65,000L in May 2021 would have an agreed threshold of 65,000L in May of next year," he concluded.