Strathroy aiming for more southern milk supplies
Published 22/06/2016 | 02:30
In the space of two short years, the Northern Irish milk processor Strathroy has amassed a milk pool of close to 80 million litres in the Republic, positioning it to rival long-established co-ops such as Barryroe and Lisavaird in size.
Not only that but Ruairi Cunningham, who owns the Tyrone-based processor along with his brother Cormac, claims that the independent processor has paid a price that would "easily" leave them in the top three this year of the KPMG Milk Price League.
"We're paying the equivalent of 24c/l plus VAT this year to our southern suppliers," said Mr Cunningham.
But he added that the number of southern suppliers switching had plateaued because so many are now tied into milk supply agreements (MSA) with the main dairy processors in the Republic. He is hopeful, though, that it will free up again in the coming years.
"It will be interesting to see how many stick with their existing arrangements when they reach the third anniversary of their contracts over the coming six months," he said.
However, the Tyrone man noted that it would be difficult for dairy farmers to make the switch given the two-year notice that was required from farmers wanting to opt out of their existing MSAs.
"It'd be a bit like telling the wife that you wanted a divorce, but you'd be sticking around for two years. It'd make for a long 24 months!" he commented.
Despite the lack of new suppliers, Strathroy has seen volumes grow by close to 20pc over the last year on a like-for-like basis through the expansion with current suppliers. He believes that his suppliers have the best of every world in that none are bound by milk supply agreements, while the processor has committed to take whatever milk the farmer produces indefinitely.
"We're tied to them but they aren't tied to us, so we really have to be able to compete on price. But the proof of the pudding is the fact that none of the Southern suppliers that we've taken on have left," said Mr Cunningham.
He added that the company was fortunate to have been able to tap into such a large pool of milk in Wexford in 2014.
Close to 20 million litres of the 103-million litre Wexford Creamery pool opted to transfer to Strathroy following dissatisfaction with the deal done between Wexford management and its purchaser Glanbia.
The development is widely credited with providing enhanced conditions for new suppliers that did eventually sign up with the Kilkenny-based giant.