Action group tells farmers to spurn Dairygold deal

Dairygold Concerned Farmers Action Group is urging farmers not to sign the milk supply agreement (MSA), having failed to convince the co-op to adopt what it says is its more tax-efficient model.

Action group members Jim Treacy, Noel Shinnick, Jerome Lenihan, and Eugene Sheehan met Dairygold management on Wednesday. Dairygold was represented by CEO Jim Woulfe, chairman Bertie O’Leary, and senior managers James Lynch and Tim Healy.

The action group suggested to Dairygold that it offer its members the choice of a deferred payment of 1c per litre over the next four years as an optional alternative to paying into the revolving fund.

The group says the deferred model would be more tax-efficient for farmers, while also gathering €40m for the co-op over the four years. Members who needed to share-up could, in due course, use this fund to buy any new shares required. The action group said Dairygold rejected this proposal.

The group said the co-op also rejected its proposal that Dairygold should, as a goodwill gesture, pay the 3c-5c per litre bonus on the 2012 milk supply to all members, not just those who sign the MSA.

The group said the co-op is withholding this money — which it estimates at around €3,00-€4,000 to an average supplier — to force farmers into signing the MSA.

Dairygold said that its programme of one-to-one milk supplier consultations is going very well, with more than 50% of members now having signed the MSA. The society is meeting around 60 milk suppliers per day. The programme will continue to the end of March.

The spokesman stated: “The society is confident that its funding model for expansion is well grounded, following extensive debate over the last two years. There are many alternative views being portrayed on how funding should be established, but the society is confident that its funding mechanism reflects the considered views of the elected representative structure of the society.”

The action group said Dairygold’s executives told them they based their MSA on the supplier contract model of sharing-up, coupled with a revolving fund, as used by Friesland Campina, the giant New Zealand co-op.

Mr Sheehan said: “I asked them why then they didn’t also copy Friesland Campina’s model of paying 20% of their profits into the fund. I was told that would happen in phase two, but they couldn’t say when phase two would be.

“I also said their loan note offered a very poor interest rate [around 4% plus the Euribor rate]. The loan note is a high risk, unsecured loan which suppliers are asked to give to the co-op, and it should offer a premium rate. You would get a better deal from An Post or the Government Solidarity Bonds, and they are both secured.

“In terms of the creditor list, the farmer comes fourth after the Revenue, the banks, and Dairygold staff.

“Dairygold said we had done a lot of damage to the reputation of the loan note by generating bad publicity. We dispute that view. All we have done is encourage debate. Farmers had €10m in extra costs due to the bad weather last year. They were also down €10m from the cows having reduced their output in such a bad year.

“Dairygold took 5c per litre from their suppliers in the peak months, which amounts to around €40m. Maybe farmers aren’t buying the loan notes because they just don’t have the money.”

The action group also says it is awaiting a reply from Dairygold’s solicitors to its queries on the MSA’s clauses on assignability in the case of a farm transfer. The group wants written confirmation that the co-op’s clarification document will be signed by Mr Woulfe, as per the society’s other prior legal documents, and included with the MSA.

Mr Sheehan said Dairygold’s MSA compares poorly with the Kerry Group supply contract, which offers a commitment on the milk price, zero share-up and 30 days’ notice before a transfer.

The Dairygold spokesman said the clarification document on the MSA, as circulated on Jan 15, is legally binding and so forms part of the terms of the MSA.

He said the co-op had “long ago” considered the deferred payment model, along with other models, and decided the MSA was a better model. He added that, where there are financial hardship cases, the society will engage with suppliers on an individual basis and assist milk suppliers’ expansion plans as much as possible. Anyone with any issues with regard to member funding should talk to the society’s advisory team as soon and possible.

The Dairygold spokesman said: “Experience is showing that participation in consultation is providing clarity, assistance and reassurance to milk suppliers in making confident decisions with regard to their own post-quota milk supply plans.”

Dairygold says more than half of its 2,950 milk suppliers have signed the MSA. The action group says around 1,000 suppliers have expressed their intention not to sign the MSA. Dairygold’s one-to-one meetings will continue to the end of March sign-up deadline.