New Pricing Model for Irish Milk
In this week’s news, learn the details of the new pricing model for milk in Ireland. The new quoting system is designed to more closely reflect the current standard of the product and goes into effect starting January 2021. To better understand the changes, take a look at Glanbia’s recent milk prices quoted using both models.
Starting January 2021, the decision made by DII introduces the European standard of milk pricing based on 4.2% butterfat and 3.4% protein, allowing for a better price comparison on the market in Europe. From now on the processors will quote two prices based on the old and the new model, and will no longer quote the euro per kilo milk solids price. The DII argued that the current model assuming 3.6% butterfat and 3.3% was more closely reflecting the standard of Irish milk in 1990 than that of 2019 which amounted to an average of 4.17% butterfat and 3.54% protein. However, the decision faces opposition from the Irish Farmers Association (IFA) claiming that the producers have been sidelined from this decision.
Following the new price quotation system, Glanbia announced the price at 38.32c per liter of their Irish milk based on the new model. The company set the base price for milk calculated with the old model of 3.6% butterfat and 3.3% protein at 30.68c per liter. In addition to the base price, the co-op also declared a seasonality bonus of 4c per liter for quality creamery suppliers which aim is to encourage manufacturers to flatten the supply curve. Still calculated based on the old model, the comparison of December 2020 milk prices from the major Irish producers indicated that the lowest prices were set by Glanbia at 30.68c per liter (including VAT) and the highest by Drinagh at 32.60c per liter (including VAT).