New protocol gives clarity to dairy co-ops and producers

The agreement of a new Milk Transfer Protocol by the dairy co-operative members of ICOS provides clarity and certainty around milk transfer for the small proportion of milk producers nationally who are not already in Milk Supply Agreements.

You might ask, why is a formal protocol necessary?

The main rationale is to protect the long-term stability and economic contribution of the co-operative dairy processing sector, which is owned and controlled by co-operative milk producers.

ICOS continues to acknowledge the right of any non-contracted milk supplier to transfer their milk supply, on the basis that it is done in an orderly process in the co-operative interests of all suppliers.

Stability is important to our industry. Notwithstanding the current market volatility, Irish dairy farmers have benefitted strongly from the overall strength and confidence which exists in the sector.

The supply of milk involves a long-term and stable relationship. It requires the purchaser to guarantee to collect milk every couple of days and to put facilities in place to process and market that milk.

It also generally involves the co-op extending credit to the supplier, for the purchase of inputs.

The purchaser also administers quality assurance schemes, including inspections and testing by co-op personnel and the Bord Bia Scheme.

Most suppliers are members of their co-operative, holding shares. Both parties are subject to the provisions of a Milk Supply Rule (as included in many co-op rule books).

These structures are important and can’t be circumvented, so it’s important to allow a proper period of time for co-ops and intending transferors of milk to get matters in order prior to a transfer taking effect.

Co-ops and their associated dairy companies have invested hundreds of million euros over the past five years on behalf of their members.

This is to provide the processing capacity, value added, and routes to market for milk which their members have expressed the wish to produce.

Without the security that milk producers and their co-operative processors have collectively created to date, Irish dairy farmers would not be so well positioned to face the post-quota challenges.

The expenditure which has been undertaken by co-operatives would also not have been possible without the ongoing close relationship and certainty that exists between farmers and their co-ops.

In neighbouring countries and jurisdictions, with different histories, and without the benefit of a strong co-operative culture, the interests of farmers have suffered, and their industries and prospects are significantly poorer than those which exist in Ireland.

Acknowledging all of these factors, the ICOS Milk Transfer Protocol provides for an orderly transfer of milk supply, where required, and relates only to milk suppliers who have not signed a Milk Supply Agreement or a contract.

It will be applied by all ICOS-affiliated co-ops and their associated milk purchasing entities in the Republic of Ireland and it has three main elements:

  • All ICOS member co-ops have agreed to apply a minimum 90-day notice period (three months) before commencing milk collection from transferring suppliers;
  • On receiving an application from a milk supplier (who wants to transfer from another co-op), the recipient co-op must satisfy themselves that the milk is not subject to a pre-existing Milk Supply Agreement or contract;
  • The recipient co-op, if they are in a position to take on the supplier, will send a notification to the existing milk purchaser, in a pre-agreed format, to allow that co-op to sort out any outstanding issues around debt, co-op shares, etc.

The transfer may then be progressed once all criteria are fulfilled.

The development of the Milk Transfer Protocol is good for co-ops and farmers because it means that they can collectively continue to benefit from a strong co-operative sector.

Ireland, and our dairy industry, are very small on a global scale, and we need to create shared solutions which demonstrate the overall strength and capacity of our industry.

Initiatives like this must form part of our approach to the various challenges and opportunities that will present themselves as we look forward towards continuing progress in the years ahead.

Jerry Long is chairman of the ICOS Dairy Committee.


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