Glanbia joint venture proposals win strong support among agri-groups

Milk industry and farmer groups have voiced strong support for Glanbia’s joint venture proposal, which would give Glanbia Co-op shareholders majority ownership of future milk processing.

The co-op umbrella group ICOS, along with the principal farmer groups IFA and ICMSA have all endorsed the 60:40 joint venture deal following a series of well attended meetings with members.

Glanbia co-op members will vote on Nov 13 on the proposals by Glanbia whether or not to create Dairy Ingredients Ireland, which will then become a joint venture, Glanbia Ingredients Ireland, which will focus on preparing for the abolition of milk quotas in 2015.

The joint venture will include the assets of Dairy Ingredients Ireland, which generated earnings of €44m before tax in 2011.

ICMSA president John Comer described the proposal as a step towards ensuring additional processing capacity is put in place, while also ensuring that the best possible milk price can be returned to farmers.

Mr Comer said the figures put forward by Glanbia stand up to scrutiny and that a sustainable, profitable business delivering a competitive milk price can be delivered through the joint venture.

“The key concern for our members is the payment of a milk price that allows them to develop in a sustainable fashion,” said Mr Comer. “It is clear that there will be volatility in dairy markets in the future. Based on our deliberations, we believe that the joint venture will be in a better position to deliver a milk price, but, like all businesses, this will be dependent on the management and board to deliver for farmers, particularly during periods of market downturn.

“Quite clearly, it is essential that the new entity is more aware of, and sensitive to, the pressures on dairy farmers. Having discussed the matter minutely, we believe that it will be better than the current PLC structure in this regard.”

Mr Comer said farmers have been voicing concerns about a potential dip in price per litre of milk that might follow the 60% rise in milk output required for Glanbia’s new production plant.

He said ICMSA members have been satisfied by written assurances given by Glanbia on questions relating to milk price, pensions, and other operational concerns.

The ICMSA is the latest of the agri-food sector bodies to add its support to the joint venture proposal. Other recent endorsements include ICOS and the IFA.

ICOS president Bertie O’Leary said: “For actively trading farmers, there is no substitute for being in a position to influence and control investment and management decisions in regard to their future processing and marketing requirements.”

IFA national dairy committee chairman Kevin Kiersey said the joint venture proposals constituted a very ambitious, well thought out, and fair method to bring back dairy processing into farmers’ control without an excessive burden of debt — an important move to provide for expansion post-2015.

Mr Kiersey said i it would be helpful for Glanbia to progress a small number of areas, raised by IFA from the early stages of these discussions, to help get a positive vote over the line.

“There is a need for Glanbia to give either an uplift upon repayment, or co-op shareholding, in return for the 2c/l deduction on growth milk.

“I also believe that no deduction should apply when milk prices fall below 25c/l plus Vat.”