I have such high hopes from the ‘new era’ of Glenbia Co-operative. I look forward to greater transparency and accountability and more meaningful relationships with suppliers.
That mantra phrase of “ambitious propositions” with “strong financial discipline” around “best possible milk price” still rings in my ears, but eight weeks into this new era I have more questions than answers.
Getting 64.7c/L for April’s milk set the record on our farm, but the way the price was calculated wasn’t straightforward, plus the “best possible milk price” was Lakeland, Carberry and DairyGold was below.
We had a base price of 46.58c/L and an Agricultural Input Support payment of 3c/L, plus a Sustainability Action payment of 0.5c/L.
Glanbia Suppliers are well-used add-ons to the base price: We have seen various co-op endorsements that came from coffers of Glanbia Co-op share dividends that Glanbia Ireland had during the previous ownership regime involving plc To increase the price of milk.
I used to believe those piecemeal payments were behind us, but I find it harder to understand milk price calculations now than ever before.
The half-cent Sustainability Action payment is to help dairy farmers reduce their carbon footprint through Glenbia Co-op’s ‘investment’ in environmental action.
What a wonderful way! I must remember to tell my kids that a portion of their pocket money is for their education and I can breathe a sigh of relief about the 3rd level payment down the line!
The virtue of Agri Input Support payments is laughable: the implication is that 3c/L needs to be set aside for its own category to support buying food and fertilizers – on the off-chance we use it to travel the world We do!
Exaggeration aside, agricultural input payments are meant to support all suppliers, including those tied up in fixed price contracts with milk.
This raises the question whether fixed milk contracts should be changed to take advantage of the boon of prices? The decision to enter into a fixed milk price contract is an understanding that the price of milk will not change despite changes in market conditions.
Glenbia executive Sean Molloy said last month at the launch of Phase 18 of the fixed milk price plan: “On average, over the past 10 years and up to 2021, such fixed milk price plans have outperformed the market.”
It definitely puts things in context. As a co-op, perhaps this is the right move to support on fixed milk contracts, but let me remind you to ask for 3c/L when the reverse happens.
Secondly, Glenbia Co-op has decided to bring about a significant change in the way milk is paid. Being paid once a month is something we farmers know how to manage.
Presently payments are made to the suppliers on the 18th of every month. Many schedule direct debit payments to come out after this date.
Farmers will now get 50 pcs on 9th of the month based on last month’s milk price. For example, almost half of the June milk test will come on 9 July and the rest on 25 July based on the price of May milk. Clear as ditch water.
Note that the balance payment will come after the date many have set up for direct debit!
I have not met a single farmer who is in favor of this change.
Glenbia Co-op claims that the action is “in response to excessive and unpredictable inflation of agricultural inputs”. Really?
Does this mean that if the prices of agricultural inputs come down, the suppliers will be paid again once a month?
A split payment doesn’t help counteract any price input growth – it only complicates a relatively clear and simple transaction.
Adjusting the two payments would involve more banking and administrative costs – a questionable decision when most farmers do not want to implement it.
Is this a convenient strategy to delay milk price announcement?
In keeping with the ethos of “Strong Financial Discipline” we have heard time and again from the Management, with milk pricing implying prudence, there is certainly no bar to unnecessary complexity of a simple process.
Maybe strong financial discipline is reserved only for suppliers?
In this new era of Glenbia Co-op, I think management has fallen over the fence first.
When small decisions are unnecessarily complicated, farmers are ignorant of emotion and display extravagant use of funds, I fear the board’s “ambitious resolutions” which contain big decisions.
Gillian O’Sullivan farms Dungarvan near Waterford with her husband Neil