Glanbia unveils voluntary fixed base manufacturing milk pricing scheme
The scheme will be available to up to 25% of Glanbia manufacturing milk suppliers from January 2011 for a three-year period, subject to set guidelines on milk quality. Farmers welcomed the pricing scheme, details of which have been sent to all Glanbia suppliers.
Both the IFA and the ICMSA welcomed the price security promised by the scheme. It will allow their farmers to “hedge” at least a proportion of their output, allowing them to plan ahead for the next three years.
Meanwhile, Glanbia is said to be in talks to acquire the Dawn liquid milk business in Limerick from Kerry Group. Arrabawn bought Kerry’s liquid milk operation in Galway earlier this year.
Industry sources believe that further consolidation will take place in Irish liquid milk production during 2011. Neither Glanbia nor Kerry Group were willing to comment on speculation regarding the Dawn liquid milk business in Limerick.
Regarding the new milk price hedging scheme, Glanbia Ingredients Ireland chief, Jim Bergin, said: “This scheme will allow qualifying suppliers to manage volatility through a fixing mechanism.
“Our pricing policy for the remaining milk pool remains the same as before in that it will continue to reflect prevailing market conditions.
“While this opportunity is currently limited to a defined proportion of our total milk pool, we regard it as a major development with the potential to provide real benefit to our suppliers. We are also committed to exploring similar partnership offers with more of our key customers with a view to increasing the opportunity for suppliers to engage in this or similar schemes.”
The base milk price of 28cpl (VAT excl) will be based on standard milk constituents of 3.6% butter fat and 3.3% protein and adjusted for actual constituents. Seasonality and related bonus will operate as normal.
The milk price will be set at this level for a three-year period to December 2013. Applicants must supply at least 15% of their milk quotas at this fixed milk price. The balance will be paid for at the prevailing Glanbia manufacturing milk price.
IFA national dairy committee chairman Kevin Kiersey said the scheme was a positive move to address farmer concerns over price volatility.
He said a stable milk price for three years will give farmers more confidence to invest in the future of their business, and he felt the Glanbia proposal would suit many of their suppliers. He said the scheme should be made available to all milk producers and called on other processors to come forward with similar options for their producers.
ICMSA dairy committee chairman, Pat McCormack, said: “We would like to see the fixed price at a higher level, but it certainly represents a first step. Glanbia should now look at the possibility of such a scheme for farm inputs as instability in input prices is now also a massive issue for dairy farmers.”
Glanbia’s Jim Bergin noted that the scheme is being made available to those suppliers performing at the upper end of a combination of quality standards and monthly milk supply profile.
Qualifying suppliers will have to have passed all Glanbia milk quality related tests over the year to November 2010. Their supply profile will also have an annualised spread over at least 10 months, with no more than 16% of total milk supply in June.
The scheme relates only to base manufacturing milk price and has no impact on Glanbia’s milk purchasing quality and safety policy.
