Glanbia Ireland is introducing a temporary mechanism “to manage the rate of growth in peak milk supplies from next year” – which will see suppliers needing to rein in increases in milk supply during peak season next year.
The new policy will apply to milk supplies during the peak supply months of April, May and June from 2022.
The base used as an anchor for the policy will be calculated on each supplier’s highest total volume over the peak supply months of 2018, 2019 or 2020.
It will not be linked to a farm’s 2021 milk supply volumes, the processor says, and there is no restriction on growth in milk supply volumes outside of the three “peak supply months” of April, May and June.
- Farms with annual milk supply of less than 550,000L in the base period may grow their volumes over the peak supply months by 5% per year over their base;
- Farms with annual milk supply of over 550,000L may grow their volumes over the peak supply months by 2.5% per year over their base;
- Growth for recent entrants (less than three years) will be facilitated up to the 550,000L threshold, after which point they align to a compound growth rate of 2.5% on peak months (April – Jun);
- For suppliers who have a peak supply profile higher than the Glanbia Ireland (GI) average, their peak supply volume will be adjusted down to reflect the average GI profile. No adjustment will be made to suppliers who have a profile at or under the GI average.
For expanding suppliers, all milk volumes supplied above the allocated peak volume over the peak supply months will incur a milk price deduction of 30% of the prevailing milk price each month, or the cost associated with the disposal of the milk, whichever is higher, the processor says.
The board has confirmed that, net of costs, any funds collected through the Peak Supply Management Policy will be redistributed and paid out in the milk price at the shoulders (outside of peak) under existing or future seasonality schemes.
In order to address some of the challenges that this policy may create for some suppliers, the board has agreed a number of measures.
- Enhanced Seasonality Bonuses to incentivise production outside of the peak supply months;
- The launch of a once-off retirement scheme that will offer a five-year incentive for producers that choose to exit milk production;
- The creation of a “Reserve Pool” that will allocate additional peak volumes to ‘exceptional cases’ where, for example, there has been a notifiable herd disease outbreak in the base period. This Reserve Pool will also be open to applications from expanding suppliers that meet a defined set of criteria.
In order to incentivise milk production outside of the Peak Supply Months, the board of Glanbia Ireland has confirmed that, for the duration of this policy, there will be an unconditional December, January and February seasonality bonus payment on all creamery milk volumes.
From January 2022, the rates will be 4c/L for January, 3c/L for February and 4c/L for December, all figures inclusive of VAT.
These bonus payments will also be paid to liquid milk and autumn calving scheme participants on any incremental milk in future years above their 2020/21 winter season deliveries.
The unconditional seasonality bonus rates will be subject to annual review.
Retirement Scheme and new entrant policy
Glanbia Ireland is to launch a once-off, voluntary retirement scheme for interested suppliers.
This scheme will be open to applications from all current Glanbia Ireland milk suppliers in the Republic of Ireland (ROI) and will offer a financial incentive to suppliers who cease milk production no later than January 1, 2022.
Peak milk volumes retired by milk suppliers availing of the scheme will be used to contribute to the ‘Reserve Pool’.
The Retirement Scheme will be funded through a contribution of 0.075c/L from all ROI milk supplies over a five-year period from 2022.
Glanbia Ireland chairman John Murphy commented, stating: “The Peak Supply Management Policy will allow for managed growth.
“It is a temporary measure necessitated by the delay in our investment plans at Belview.
“In the interim, the policy will give certainty to suppliers. The board and management remain ambitious for growth.”
Chief Agribusiness Growth Officer, Sean Molloy, said that advice and support will be available through Glanbia Ireland’s Farm Development Managers.
In the coming weeks, all suppliers will be provided with their individual peak profiles.
“The overall objective of these initiatives is to ensure that all milk delivered can be processed during peak season in 2022 and 2023,” he said.