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Sunday 4 December 2016

Glanbia introduces seasonality changes

Declan O'Brien

Published 21/12/2011 | 06:00

Glanbia has announced a series of amendments to its milk seasonality scheme, which is being introduced next year.

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The changes to the scheme, which have been passed by the Glanbia board, were detailed in a letter that was sent out to the company's suppliers this week.

Reacting to the Glanbia move, Pat McCormack, of the ICMSA, said the amendments were absolute requirements, not concessions, and shouldn't have been presented as such by Glanbia.

Under the changes, the level of deductions to be imposed for the first year will be halved compared with the original terms of the scheme.

This means that farmers who increase their total supply in June, relative to the rest of the year above historic reference levels, will now face a fine of 0.5pc of milk price for every 0.1pc increase in June deliveries above a 16pc threshold. Under the original proposals, the level of fines would have been 1.0pc of milk price. The fines are levied on May and June supplies.

However, the Glanbia letter stressed that this change was subject to an annual review, and from 2013 the original terms of the scheme could apply if the desired changes in supply patterns are not acheived.

In a further concession, the reference period for the calculation of the interim deduction in July next year will be the second half of a three-year reference period from 2008 to 2010 and not the second half of this year as was initially proposed.

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In the letter to suppliers, Glanbia said this change was motivated by an acceptance of the unusual milk supply pattern this year, which saw a very high peak in the first half of the year followed by a low supply level in the second half.

Glanbia said that the changes to the scheme were in response to the "genuine concerns" that suppliers had expressed.

"Glanbia will work with suppliers to ensure that we provide all of the information required to plan your individual supplies so as to avoid incurring any deductions," the letter stated.

The scheme will now come into operation from next month, suppliers were told.

However, the ICMSA remains opposed to the scheme.

The farm organisation estimated that farmers with a 227,000-litre (50,000ga) quota -- and traditional supply profile of a spring-calving herd -- will face fines of up to €1,159 under the current scheme structure if they increase their total June milk supplies by 1pc above their historic reference level and the 16pc threshold. This €1,159 fine calculation is based on a milk price of 34c/l.

The ICMSA is also unhappy that the fines will be levied on supplies for May and June, which generally accounts for up to 30pc of total deliveries from a spring-calving herd.

Milk suppliers could also find themselves in a situation where they are forced to push supplies in the back end of the year to avoid a seasonality fine, even though producing milk at this time of the year could push them over quota and expose them to a superlevy fine.

"The core purpose of Glanbia's seasonality scheme is to force farmers to produce milk at a time and in a pattern that suits Glanbia rather than at the time when the cost to the farmer is lowest," Mr McCormack said.

The scheme was a mechanism to transfer costs from Glanbia as a milk processor to its farmer suppliers, he added.

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