Arrabawn's €20m expansion plan, aimed at increasing capacity to 2m litres of milk per day, is on track to be fully completed before quotas end in 2015.
With Arrabawn suppliers expected to increase milk production by 55pc between 2015 and 2020, the north Tipperary co-op is planning to increase its peak milk processing capacity by 62pc on its 2012 milk intake.
Speaking at the Arrabawn annual general meeting on Thursday, chief executive Conor Ryan said the new milk supply terms and conditions for the co-op's suppliers would come into force in June this year.
The scheme will cap milk intake by the co-op for the months of May and June. This cap will be based on the predicted supply for each year, as indicated by the farmers the previous autumn. Farmers will also be required to supply at least 85pc of the predicted production within the calendar year.
Suppliers will also be required to contribute up to 0.7c/l towards the cost of the investment in expansion of processing. These contributions, calculated for each individual farmer, will mean that by the end of 2016, all milk suppliers will have a minimum shareholding reflecting their milk supply.
Speaking at the AGM, Mr Ryan said there was a positive outlook for milk price for 2013, due to the drought in New Zealand and lower milk output globally.
He told the shareholders that although forecasting milk prices forward was always difficult because of market volatility, the current price of 35c/l could increase to 37-38c/l over the coming months.
He added that if present market supply trends continued, a milk price above 36c/l could be sustainable to the end of 2013.
Arrabawn chairman Patrick Meskell announced an operating profit of €1.14m on a turnover of €185.2m for the co-op in 2012.
Profit after tax was €400,000, a drop of €5.8m on the previous year, but the 2011 income included a non-operational figure of €4.6m.