Sunday 23 November 2014

Dairygold outlines price of expansion

Suppliers will be expected to pay 0.5c/l on supplies over 75,000l

Declan O'Brien

Published 11/07/2012 | 06:00

Dairygold milk suppliers will be expected to pay 0.5c/l on all milk supplies above 75,000l, as part of the co-op's processing expansion plan.



The revolving fund, which has already been approved by the Dairygold board, will apply to all milk supplied and not just 'new milk'.

The Dairygold package was outlined to regional committee members in a series of meetings last week. The final proposals will be detailed in letters to the co-op's 3,000 milk suppliers, which are due to be sent out this week.

The southern processor expects milk supplies to grow by 63pc in the five years following the abolition of milk quotas. This is based on a survey of suppliers carried out last year.

In order to process the additional 550m litres annually, Dairygold plan to build two 7.5t/hr driers at their site in Mallow, Co Cork.

The development of the Mallow plant will be on a phased basis, with the initial construction of the milk intake and processing facilities and the commissioning of the first drier taking place in 2015-16 and costing €130m. The second drier will be installed closer to 2020, if needed, and is expected to cost a further €40m.

While bank loans will finance much of the development, it is proposed that €50m will be delivered by the co-op's milk suppliers. This will involve four mechanisms.

The first is the revolving fund of 0.5c/l that will be clawed back on all milk supplies above the 75,000l threshold.

It is envisaged that the fund will be collected over 60 months and this will be spread out over seven years. A trigger milk price of 27c/l will be employed for the fund, with collection of the charge suspended if milk prices drop below this level.

Interest on farmer contributions to the fund will be paid at 2.5pc above the European interbank rate (Euribor) or more than 3pc at current rates. Contributions are to start from 2013.

Dairygold is also planning to standardise suppliers' shareholding in the co-op, with all farmers being required to have four shares for every 1,000l of milk supplied. Shares will cost €1 each and deductions will be made on monthly milk cheques to bring farmers up to the required level.

In addition, the co-op is to launch a voluntary five-year loan offer. This package, which is termed a loan note, aims to attract €5m a year for the three years from 2013 to 2015 and will pay interest to farmers at 4pc above Euribor.

A deferred payment mechanism will see suppliers having to set a peak supply month over the three years from 2010 to 2012.

CONTINUED ON PAGE TWO

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