independent

Wednesday 16 April 2014

Dairygold showdown

Intense lobbying ahead of key vote over new milk agreement

Dairygold

DAIRYGOLD and disaffected dairy farmers have made their final pitches to the co-op's members ahead of next week's Special General Meeting in Mallow where a vote will be taken on a controversial new milk supply agreement.

The agreement is a contract between Dairygold and its suppliers, designed take into account the extra milk produced once the quotas are lifted in 2015. Dairygold says the agreement is essential if the co-op is to capitalise on the potential of a post-quota market. The Dairygold Milk Suppliers & Shareholders Group (DMSSG), who oppose the plans, are disputing Dairygold's milk production projections and claim that farmers are being asked to invest in the plan without any detailed costings or information for the expansion.

Both sides of the dispute this week issued statements outlining their arguments ahead of next Thursday's meeting.

In its statement, DMSSG claimed that the forecasted milk production expected of suppliers is "very optimistic."

"France wants a post quota minimum safeguard to prevent a free for all. The EU Parliament is stating that if a support mechanism is activated (to compensate for the predicted volatile milk price) they want a levy imposed on anyone who has increased milk production by over 5%. Add to this today's austerity economic policy, the extreme weather, the ICOS warnings, the changes in Single Farm Payments, Disadvantaged Area Payments, Grants, and difficulty in borrowing money. All this may greatly alter the future expansion plans of farmers who in 2011 estimated a 62.% increase in milk output," the group claimed.

The group further accused Dairygold of not producing a detailed business plan and costings to justify the level of share-purchases and investment required of members as part of the agreement.

"Us farmers, like any other investor, put capital into their farms and the co-ops we are supplying in order to obtain a return towards our income. We are not shy about investing money or expanding, what concerns us is investing in a blind manner with no detailed information forthcoming from the Dairygold board as to the costings for the proposed project, the marketing of new product or the return on capital employed," the statement read.

Meanwhile, Dairygold has warned that failure to ratify the Milk Supplier Agreement would hamper capital investment in its processing, as it there would be no logic in planning expansion for an unknown amount of milk.

"Without suppliers' committed milk forecasts we could not predict what milk volumes would be delivered and we could not put the appropriate processing capacity or marketing plan in place to meet any significant growth in volumes," Dairygold said.

The co-op also said some 2,400 farmers representing over 80% of it suppliers had signed the agreement, and that scrapping the plan would leave these farmers in "legal limbo." Furthermore, it said that Dairygold has guaranteed the repayments of members' funding contributions and warned that a lack of investment would have an impact on milk prices.

"No member funding means a greater reliance on lenders, which would reduce our control over the setting of milk price and would increase milk price volatility," said the co-op.

"The Society would be unable to process all milk received over the peak period, resulting in 'distressed milk' sales to other processors, subject to their available capacity. Currently 6% of Dairygold's peak volumes are processed by third party processors in collaboration arrangements."

The vote takes place at the SGM in Dairygold, Mallow, next Thursday.

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