Dairygold members still seeking clarity on milk supply contracts
Over 1,000 of the Co-Op’s 3,100 members gathered in Mallow GAA complex last week to discuss their concerns about the MSA. When asked by the discussion chairman, Donoughmore farmer Conor O’Leary, if they would like to see the contract torn up and to be involved in the redrafting of a new contract, the overwhelming majority raised their hands.
Addressing the meeting, Tipperary-based solicitor Oliver Ryan-Purcell advised people to take individual counsel before signing. He said suppliers were left with a complex series of issues to consider when reading the MSA, the aligned Terms & Conditions document and Dairygold’s recent clarification document.
Mr Ryan-Purcell raised questions about the three MSA documents’ overall lack of clarity and one-sidedness in favour of the Co-Op. However, his issues were mainly with the wording of the documents which, he said, probably did not reflect Dairygold’s intentions.
“I don’t wish to say anything to damage the co-op movement, but the document is not written to take into account a change of ownership,” said Mr Ryan-Purcell. “It states the co-op could assign the farmer’s contract to another co-op. This raises questions about the situation should anything happen to Dairygold, or should it be taken over by another co-op.”
He questioned the MSA’s wording in relation to transfer of contract and rights of assignment. He also said, rather than three separate documents, he would rather see farmers presented with one document, with all of the elements listed from A-to-Z.
Mr Ryan-Purcell said: “This is a very serious document. In a society that deals with people on an individual basis, it is normal that both sides work with their solicitors and go back and forth until both sides are happy.
“Everybody has slightly different considerations, so I would advise everybody to get individual advice. My main issues with this contract is its lack of openness and its one-sidedness. It is an open-ended agreement that can be changed by the Co-Op.”
Dairygold developed the MSA documents in consultation with Daire Hogan, a partner with McCann Fitzgerald solicitors. Arthur Cox solicitors also reviewed and approved of the contract.
As Dairygold gears up for post-quota expansion, the Co-Op’s board felt they needed a clear picture on matching their processing capacity with their probable output. The MSA includes an agreement on milk forecasting, members’ commitments to production goals and the repayment mechanism for the new revolving fund, created to pay for increased processing capacity.
Members are also required to “share-up”, ie to bring their shareholding in line with their milk output. Whether members sign the MSA or not, Dairygold will continue to accept their milk.
In Mallow, some farmers asked why they should pay into the revolving fund and buy more shares when they did not plan to expand.
Daire Hogan said that these commitments were already covered in the regulations governing their Co-Op membership. Thus, even those suppliers who do not sign the MSA will also have to share-up and pay into the fund.
Daire Hogan said: “The Co-Op’s rules oblige the Co-Op to accept, and each member to supply, all of the milk he/she has on the farm. If he fails to supply all his milk, he may be relegated to an A3 member. The existing rules don’t state that the Co-Op must pay the same rate per litre.”
Dairy farmer Jim Desmond likened the MSA to the situation in 2005/06 when the Co-Op deducted 2p per gallon from 23 suppliers who did not have a dairy cert. One farmer said that 1c per litre paid over the next ten years would raise €130m for the Co-Op, and said this could be done without any MSA contract.
The meeting’s chairman, Conor O’Leary, summarised several views on this subject by stating that it would be preferable for Dairygold to backtrack and to reword the document to better reflect members’ views.
A show of hands showed overwhelming approval for a suggestion to redraft the MSA. A statement issued by the Co-Op on Thursday (see below) made it clear that it does not plan to backtrack.
A separate show of hands indicated that around 40% of members will have to buy a significant number of shares to match their milk supply. Due to the very different situations in which each farmer finds him/herself, the bulk of the advice at the Mallow meeting, from all sides of the debate, reminded farmers that they needed to study their own situation before deciding on the MSA.
Immediately following the meeting, ICMSA deputy president Pat McCormack praised event chairman Conor O’Leary for the way he controlled what could have been an explosive meeting, and for ensuring all of the major issues were aired. While the local Cork ICMSA has voiced concerns about the MSA contract, Mr McCormack is hopeful some resolution can be found.
“If there is room for all concerned to close the gap between them, I’d urge them to do so,” Pat McCormack said.
“I’d urge members to get involved, and to learn all they can from the one-to-one meetings with Dairygold.
“Originally, there was supposed to be a 2cpl penalty, which was like a red rag to a bull. Through lobbying and discussion, that was replaced with a 0.3cpl bonus from March 31. We feel that should be paid out in any case, based on the hardship farmers endured in 2012.
“As we approach 2015, there will inevitably be change, and there will be a level of exclusivity of supply required. I am hopeful that the Co-Op ethos will win out for the benefit of all members of Dairygold.”
*Dairy profits highest in Ireland, Germany, UK? Next week: International Farm Comparison Network report.
