Glanbia Ireland (GI) has this evening (Tuesday, March 29) announced details of a new support scheme for its milk suppliers in fixed milk-price schemes.
The milk processor said it is “very conscious of the significant challenge that some suppliers are facing as a result of the volume of milk contracted under Fixed Milk Price Schemes [FMPS]”.
These schemes have operated for over a decade and have “served suppliers in addressing volatility in dairy markets”, according to a statement from the milk processor.
Commenting on the scheme, Sean Molloy, Glanbia Ireland’s chief agribusiness growth officer, said: “As a consequence of recent world events, there is unprecedented volatility in milk pricing, farm input costs and availability.
“This dynamic is proving to be particularly challenging for milk suppliers that have a high proportion of their milk contracted under FMPS.”
“In an effort to help address the challenges faced by farmers with larger volumes contracted under FMPS, the board of Glanbia Ireland have agreed a number of voluntary options to help support participants,” Molloy added.
Details of the new Fixed Milk Price Support Scheme:
- For all existing Fixed Milk Price Volumes above 35% of the supplier’s total supply in 2021, Glanbia will increase the fixed milk price paid on this milk to a base of 40c/L (VAT inclusive), plus constituents;
- On top of this 40c/L, for relevant volumes, milk suppliers will be paid the Sustainability Bonus of 0.5c/L in 2022 and all seasonality payments – including any unconditional seasonality bonuses and, as relevant to particular suppliers, the Liquid Milk Premium and Autumn Calving Bonus;
- In order to qualify for this 40c/L fixed milk price in 2022, suppliers will be required to commit the same FMPS volumes in 2023 and 2024 at a base milk price of 38c/L (VAT inclusive), plus constituents and relevant bonuses or payments.
“So for example, a 750,000L supplier with 75% of their annual supply volume contracted under FMPS will have 40%, or 300,000L eligible for the milk price support scheme,” the processor said.
In this example, the value of milk price support would be €27,000.
In order to qualify, the supplier will be required to contract the same volume (300,000L) at 38c/L (including VAT) in 2023 and 2024.
Based on the average milk constituents for 2021, the expected average milk price paid on volumes in FMPS above the 35% threshold would be 45.55c/L during 2022, according to Glanbia.
In addition to this, the supplier will receive other applicable payments, such the as the Farm Input Cost Support Scheme.
Farm Input Cost Support Scheme:
- This scheme provides suppliers with a milk price prepayment of 5c/L on all volumes above the 35% threshold. This 5c/L support would be paid into the supplier’s Glanbia Trading Account in a lump sum in April or May this year;
- The prepayment will be deducted in six equal instalments from milk supply payments due to be paid by Glanbia to the supplier in March, April, May, June, July and August of 2025 and 2026.
So for instance, a supplier with 40% of their milk supplies contracted under FMPS will receive the farm input cost support prepayment of 5c/L on 5% of the contracted volumes in 2022.