Farmers urged to engage with co-ops on milk supply contracts

Dairygold farmers should engage with the co-op’s one-to-one milk supply contracts sessions, while the board should revisit any option to share additional processing with Glanbia, said IFA dairy committee chairman Kevin Kiersey.

Mr Kiersey said Dairygold’s one-to-one sessions can help farmers establish what the milk supply agreement (MSA) implies for them, and teach them the disciplines of the new forecasting process.

He urged Dairygold and Glanbia to explore every avenue to jointly invest in additional processing capacity, to make best use of scarce resources in the best interest of all milk producers.

The IFA issued guidelines in 2011 on the shareholding and control of co-ops by active shareholders. This advice highlighted the need for clarity of milk supplies, and said any farmer/processor agreements should not perpetuate the cost of quotas.

“However, the overly legalistic language of the Dairygold MSA has raised genuine reservations among farmers. IFA has examined the MSA in detail, having identified the issues of concern to farmers through consultation with our local elected officers,” Mr Kiersey said.

“The MSA is largely legally underpinned by the co-op rules. We met with Dairygold before Christmas and asked them to listen to farmers’ concerns, and to be flexible and fair. They must be mindful of farmers’ cashflows when it comes to the revolving fund or other contributions, and they must be flexible on force majeure. They must also find ways to assist suppliers with unusually high sharing-up requirements without disadvantaging other shareholders.”

Mr Kiersey said the IFA will hold Dairygold to its commit-ments on flexibility and fair dealings with farmers on all matters relating to its post-2015 plans.

Meanwhile, ICOS said Dairygold’s request that members sign a seven-year written contract is in the best interests of both parties.

ICOS chief executive Seamus O’Donohoe said: “It has been our policy since early 2010 that co-ops and their members should enter into contracts to protect the interests of both parties in the post-quota era.

“Such agreements give suppliers the assurance that their milk will be processed and the co-op the certainty that investment in new capacity will be optimally utilised.”

Mr O’Donohoe said the contention — as made by opponents of the Dairygold MSA — that now is the first time co-op members have been bound by a written contract or milk supply agreement is not correct. He said legislation has always made it clear that the rulebook of each society is a written contract between the member and his society.

“What is perhaps new for many members is their awareness that they are already a party to a written contract. As we move into an era without quotas to constrain milk volumes, clearly, some form of revised agreement must take the place of the quota regul-ations,” Mr O’Donohoe said.

“Members are being asked to achieve a ‘share standard’ proportionate to the volumes of milk that they wish to supply to the co-op and to contribute loan stock on the same basis. This is fair; any alternative financing proposal could involve the co-op in an excessive level of debt or involve the participation of external investors, both options could result ultimately in a loss of member control of the co-op.”

*For extensive coverage of Dairygold’s MSA discuss-ions with members, see today’s Farming supplement.

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