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Sunday 4 December 2016

Interest building in Glanbia contracts

Published 18/01/2011 | 05:00

Glanbia is confident of getting at least 6pc of its total milk supply locked in at 28c/l as dairy farmers begin to sign up to the three-year forward milk price contracts offered by the dairy ahead of the January 31 deadline
Glanbia is confident of getting at least 6pc of its total milk supply locked in at 28c/l as dairy farmers begin to sign up to the three-year forward milk price contracts offered by the dairy ahead of the January 31 deadline

Dairy farmers are beginning to sign up to the three-year forward milk price contracts offered by Glanbia ahead of the end of this month's deadline.

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The plc is now confident of getting at least 6pc of its total milk supply locked in at 28c/l, according to Glanbia's Food Ingredients CEO, Jim Bergin.

With around a third of the national milk pool, this equates to more than 100m litres of milk.

"Our advisers are still working through the issues with suppliers on the ground, but we've had a positive reaction," said Mr Bergin. "Farmers appreciate this as an innovative way to deal with the inevitable volatility they will face in the future."

The offer consists of a fixed price of 28c/l, excluding VAT and seasonal or quality bonuses for three years from the start of this year.

There are several conditions suppliers must satisfy before they qualify for a contract. Applicants must commit a minimum 15pc of their total quota to the contract. The supplier must have passed all milk quality tests last year and not have supplied more than 16pc of their total milk supply during June.

In addition, suppliers must commit to supplying over a minimum of 10 months.

The deadline for acceptance of the contracts was shoved out to January 31 on account of a delayed Glanbia council meeting during the recent cold snap.

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While all the indications are that ongoing demand in China will keep milk price above 28c/l in the coming months, Mr Bergin was keen to stress the role that several rare weather events are having in keeping upward pressure on global dairy market prices.

"The monsoon in Pakistan last year, combined with the droughts in India and New Zealand and the disastrous grain harvest in Russia [last year], are all conspiring to keep the market in balance at the moment," he said.

He added that the 28c/l was fair when compared with an average weighted price of 28c/l paid out to farmers from 2007-2010.

"This includes the peaks and troughs of 2008 and 2009," said Mr Bergin. "In fact, even in 2007 and 2008, when the price peaked at 38c/l, the weighted average price was only 31c/l. In 2009 it was 21c per litre, while in 2010, the average was 28.5c/l."

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