Glanbia Co-op has launched a €55m scheme that will provide interest-free cash to its suppliers when milk and grain prices are weak.
The farmers’ interest-free repayments to the Glanbia Advance Payment (GAP) scheme will be triggered when markets recover above specific levels.
This volatility measure will be in place between May 2016 and December 2020.
The GAP scheme is being funded by Glanbia Co-op through the launch of a new equity-linked exchangeable bond.
This financial product aims to raise €100m by issuing a five year exchangeable bond linked to a pledge of around 4.3m Glanbia Plc shares.
The co-op retains full ownership of the 4.3m shares unless the exchange is exercised.
This scheme is the latest in a series of farmer support measures introduced by the south-east region co-op.
Other mechanisms include fixed-milk price schemes, the €100m MilkFlex loan product and the 2016 member support package of €37m.
Glanbia Co-op chairman Henry Corbally said: “One of the core principles of Glanbia Co-op is to support our active members cope with income volatility in this current period of weak market returns.
“Through the distribution of over €600m to our members in share spinouts and support funds over the last three years, as well as fixed-milk price and the MilkFlex loan schemes, Glanbia has been doing what it can to protect our farmers from the extremes of market volatility.
“The GAP Scheme has been developed because it became clear to the co-op board that the depth and duration of the current downturn in global market prices required additional measures to support our active members at this time.”
ICOS chief executive Seamus O’Donohoe said the scheme is a cost-effective and innovative cashflow- management tool.
While farmers cannot be completely insulated from price fluctuations in a global market, this measure will help to at least dampen the most extreme effects of cash flow pressures, he said.
ICMSA president John Comer said Glanbia had been imaginative and forthcoming in terms of offering support to its suppliers.
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