Nearly half of Dairygold’s 3,000 milk suppliers have not signed the new Milk Supply Agreement (MSA), which is key to plans for expanding processing after milk quotas are abolished, the co-op has said.
The MSA incorporates 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.
Dairygold, which is Ireland’s second-biggest farmer-owned co-op with a turnover of €758 million, has said there is still a considerable level of protest among farmers not wanting to sign the new milk supply contract.
Processing capacity
However, the co-op has said its primary obligation to its milk supplier members to accept all their milk could be achieved only if appropriate processing capacity was in place when quotas come to an end in 2015.
Dairygold spokesman Pat Keating said the co-op had conducted extensive market research over the last five years to determine future milk production, and had reached the conclusion there would be a 63.5 per cent increase in milk production in 2020 compared to 2011 levels.
“The new agreement is necessary as we can’t get to a day when milk arrives and we don’t have the capacity to process it.”
He said the co-op was committed to meeting all farmers on a one-to-one basis, and was meeting 50 farmers a day to address any issues.
Tipperary-based solicitor and agricultural law expert Oliver Ryan-Purcell has said there are complex and serious issues surrounding the wording of the MSA.
He said the ability of Dairygold to change some of the important terms and conditions without the consent of suppliers was a major problem.
“Furthermore, under the contract, the milk price and basis of milk pricing was to be determined by the board of Dairygold with no meaningful parameters imposed on them.
“The agreement was non-transferable by the milk supplier. On the other hand, Dairygold could transfer the agreement or deal in any other manner with any or all of its rights and obligations under the agreement,” Mr Ryan-Purcell said.
Members are being required to “share-up”, ie to bring their shareholding in line with their milk output, which many are unhappy about, according to Julian O’Keeffe, chairman of North East Cork ICMSA.
“The share-up will create big problems for younger farmers. They’re making it compulsory to buy shares. Also, you’re tied into the contract for seven years. At the moment you can transfer to another co-op with three months’ notice.”
He criticised the legalistic nature of the document, and the fact farmers who didn’t sign it were discriminated against.
Dairygold initially said it would impose a penalty of 2 cent per litre to farmers who didn’t sign the new milk supply contract by the end of March.
Milk bonus
However, it subsequently backtracked on this and said those who didn’t sign would not be eligible for a 35 cent per litre bonus on all milk supplied in 2012.
The board of Dairygold also said that if a supplier didn’t sign the contract and agree to forecast future milk supply, any milk supplied over and above a base 2012 supply would be paid at a lower milk price.
