There’s always going to be a certain amount of risk attached to any big endeavour, a young Listowel farmer tells AgriLand.
But Dave Scannell’s attitude towards risk is that without it, there is no reward; and if his grandfather and others back in the 1970s didn’t take the risk at the time of getting Kerry Co-op off the ground, there wouldn’t be 26,000 people all over the world employed by Kerry Group plc.
Talks between Kerry Co-op and Kerry Group on the prospect of a joint venture have ramped up recently.
It is understood that Kerry Co-op has submitted a bid for 60% of Kerry’s dairy business, and the co-op is Kerry’s biggest shareholder, owning a stake of just over 12%.
Beyond the numbers
While the numbers matter, on the ground in Co. Kerry, there are livelihoods that feel threatened. Around 28km outside of Tralee lies Listowel, a town with a population of less than 5,000 people.
There is “awful fear” over jobs being lost in the Listowel-based Kerry Agribusiness milk processing site.
“If the business is streamlined, the Listowel plant could fall by the wayside…we all have friends and family working there,” Scannell, a Kerry Co-op shareholder and Kerry Group milk supplier said.
“With the type of jobs there, there are guys working that if they lose their jobs, their only alternative might be emigration.
“People have awful fear for their jobs; whereas if farmers bought it, it would be business as usual,” according to Scannell.
And then, there is the fate of the milk suppliers.
“No outsider is going to buy the dairy business just so they can turn around and pay us all a leading milk price, it would be horrendously naive for anyone to envisage that happening,” Scannell told AgriLand.
By letting an outsider buy the dairy business we, the dairy farmers, would be gambling with every one of our livelihoods.
“If an outside entity buys Kerry’s dairy business, it will cost them in excess of €800 million; they won’t be doing any favours for myself and the rest of the milk suppliers.
Leading milk price
“The reality of the situation is our Kerry Co-op board agreed with Kerry Group in 2011 that we would be paid the leading milk price on a like-for-like basis with other Irish co-ops when all of the following was first taken into account: the amount of milk supplied and the supply curve; the quality of the milk; share dividends received on Kerry shares; the seasonal bonuses we may receive; any unique markets which could alter returns on milk; and finally, the levies paid,” Scannell continued.
The milk price arbitration ruling in 2019 only agreed that the west Cork co-ops could be factored into the comparisons, but the west Cork co-ops have such a smaller milk pool and different product mix; it is fairly meaningless that they can be factored into milk price comparisons.
“Our co-op board sold a pig in a poke with the milk price contracts they got us in 2011. The leading milk price contract we have isn’t worth the paper it’s written on; if we want a leading milk price we will have to buy the 60% stake in the dairy business and pay ourselves the leading milk price.
“There’s a lot of people out there saying we already own the dairy business, so why should we have to buy it again?
“My problem with that is that farmers might have owned the dairy business at one stage – back in 1972 we definitely owned it, but when Kerry Group plc was formed in October 1986, we no longer owned it that day then, because it was belonging to the plc shareholders.”
On his own family farm in north Kerry, Scannell and his father have increased their milk production by 40% since milk quotas ended in 2015.
“What we’re looking at lately is potentially building a rotary parlour, but there’s no way we could build it if the Kerry dairy business is bought by an outsider because they wouldn’t pay us any type of top price,” he says.
“Margins are thin as it is. It just wouldn’t stack up at all. Here, in north Kerry typically, our topsoil is mainly clay and poor draining.
We’d have six-month winters in a good year; in a bad year nine or 10 months. Our cost of production is much higher and our milk solids are lower, which leads to lower milk price.
“But the reason solids are lower is because cows are on silage most of the year whereas if they were out on grass, they’d be higher – but we don’t have that luxury.”
A once-in-a-lifetime opportunity
Scannell is “wholly of the belief” that this joint venture is a once-in-a-lifetime opportunity.
“I think a lot of people don’t understand how good this is,” he said.
“My family were one of the founding members of the co-op almost 50 years ago now; and I just think it’s imperative that all shareholders get their fair cut out of Kerry Co-op.
Otherwise, everyone’s hard work for the last 50 years will just go up in smoke.
“I believe that if the joint venture talks do collapse and the dairy business does get sold to some outsiders, that we’ll get completely thrown to the wolves with milk price. We’ll never get a capital gains tax scheme for the shares.
“It’s sink or swim now. I don’t think there are many against the joint venture – I think there are many that are apprehensive.”
‘Call it a day and say enough is enough’
Scannell feels strongly that if the “joint venture talks collapse”, and if outsiders do buy the dairy business, “I can’t see any function or purpose for Kerry Co-op”.
“At that stage, I think the only logical thing to do would be to liquidate it, because some strangers would own the dairy business and Kerry Co-op would have nothing whatsoever to do with them. Kerry Co-op couldn’t be negotiating milk price with them,” he says.
“If talks collapse, the Kerry Co-op board owe it to the shareholders to then give us a vote on the liquidation of the co-op, that maybe we could call it a day at that stage and say enough is enough.”
More coverage of this to follow on AgriLand.