The banks don’t like uncertainty – and farmers know this

Surely it had crossed the minds of Glanbia executives that the banks don’t like uncertainty.

And this being the case, the business plans of many Irish milk producers are now ‘up in the air’ given this week’s decision by the dairy processer to penalise the peak milk supplies of farmers in 2022 – and possibly beyond.

As the Irish Farmers’ Association (IFA) has, quite rightly, pointed out, the move represents the reintroduction of dairy quotas in Ireland. And every Irish dairy farmer should see this week’s developments in such a black and white context

Glanbia has said that the decision is only a temporary one. However, if the processer succeeds in having its way now, it’s a development that represents the thin edge of the wedge in the context of how the Irish dairy industry manages its affairs.

There are lots of issues at stake here. It is Glanbia today: it could be every dairy processer in the country tomorrow. One-off decisions have a habit of becoming principles, once they have been tried and tested.

Meanwhile, large numbers of milk producers are now thinking about all the heifers they produced this year and last. What will happen to their milk, once they start calving next year and beyond?

And, of course, replacement heifer rearing doesn’t come cheap. Farmers will have built up significant costs against these animals, which they will not now recoup, if Glanbia gets its way.

Farmers did not create the issues

At the end of the day, farmers did not create the issues that have arisen with regard to the development of the new Glanbia cheese operation.

So why should they take the hit for a problem that was not of their making in the first place?

Last time I checked, dairy farmers work on the basis of a three-year-cycle. This is the amount of time it takes for a heifer calf to be conceived and to have that same animal join a milking group in her own right.

Contrast this with the 12 months warning that Glanbia has given its farmer suppliers of the changes coming down the track. It’s an approach that does not fit well with Glanbia’s farmer-owned heritage.

So much for the background; the reality is that all the banks will have no option but to review the business plans of every Glanbia supplier on their books.

Yes, there has been a tremendous amount of investment undertaken at farm level within the Irish dairy industry over recent years. But, as we all know, a lot of this work was carried out on the back of extensive bank borrowings.

The common thread that permeates every aspect of the Glanbia decision is that of ‘farmer reassurance’.

At the very least, Glanbia representatives should meet with representatives of the banks in the very near future, in order to persuade the financial institutions of the processer’s rock solid commitment to all its farmer-suppliers moving forward.

It’s then a case of the banks confirming that they are happy with the rationale behind the steps taken by Glanbia this week, from their farmer-clients’ point of view.