Dairygold is to drop the controversial 2c/l penalty which was to be imposed on suppliers who do not sign up to its milk supply contract by March 31 next.
Over 80 disgruntled Dairygold suppliers protested outside the co-op's Mitchelstown headquarters on Friday, voicing their opposition to a number of facets of the milk supply and forecasting agreement.
However, over the weekend, the Dairygold board decided to drop the contentious 2c/l penalty and also announced a number of other sweeteners aimed at enticing farmers to sign up to its terms.
A bonus of 0.35c/l is to be paid on all milk supplied in 2012 to farmers who return the signed milk supply agreements and forecasts before March 31.
In addition, the board announced that it will pay a feed-related subsidy of €5/t on all ruminant feed purchased from Dairygold during 2012.
Announcing the feed subsidy, a statement from the board said it recognised that 2012 was a very difficult and costly year for farmers and the €5/t subsidy will be paid via supplier accounts this month.
While Dairygold has abandoned its plans to impose a 2c/l penalty for farmers who do not sign the milk supply and forecast agreement, the co-op has warned farmers who do not signthat they face lower milk prices for excess milk from 2015 onwards.
The board said that while the co-op would continue to collect milk from farmers who do not sign up, those suppliers would have their 2012 supply base taken as their reference supply volume, by default, for future years.
For any milk supplied above this reference level, farmers could expect to be paid a lower price for this 'excess unplanned milk', the board warned.
Around one-third of Dairygold's 3,000 milk suppliers have already returned their milk supply and forecasting agreements to the co-op, leaving some 2,000 contracts outstanding.
The contracts have generated fierce opposition from a relatively small but very vocal group of around 100 farmers who claim that the contract gives Dairygold the right to revisit the terms of the agreement at any time without any recourse to the farmers who sign up.
However, Dairygold chief executive Jim Woulfe insisted that suppliers had nothing to fear.
"Even though the agreement may appear legalistic in its terminology, there is no entrapment in completing it, so I would encourage everyone to sign the agreement and complete their forecast as requested," he said.
One-to-one meetings between Dairygold and suppliers are to continue in the coming weeks to discuss individual farmer concerns. IFA dairy chairman Kevin Kiersey welcomed the Dairygold move to drop the 2c/l penalty.
"We had clearly told Dairygold before Christmas that the penalty was provocative and unfair to their suppliers and we had urged them to reconsider it," said Mr Kiersey. "I think Dairygold deserve credit for listening to us and to their suppliers, and for adopting a much more positive approach, which is fairer to farmers."
He urged all Dairygold suppliers to actively engage with the co-op's one-to-one sessions aimed at helping farmers with the production forecasting process.
"This is also the opportunity for farmers to gain a detailed understanding of the new milk supply agreement, which is largely legally rooted in the rules of the Society," he added.