Glanbia has been left red-faced as a result of its fixed milk price scheme.

Last week, the Irish Farmers Journal exclusively reported farmer anger at reductions in the July milk cheque for those who had some milk in fixed milk price schemes. Farmers claimed they were not made aware of the clawback in advance or the extent of the deductions.

Glanbia has written to all suppliers acknowledging this should not have occurred before farmers were informed, and this week will refund all deductions. The clawbacks will be spread over the next 12 months excluding December and January.

Why are so called ‘fixed’ prices being adjusted?

In the terms and conditions set out with phases three, four and five of the schemes, the fixed milk price can be adjusted upwards or downwards. It depends on two issues:

1. Where the annual average ‘non-fixed’ Glanbia milk price finishes and,

2. Upward or downward movement in farm input costs.

For phase three to five, input costs went up (inflation), so adjustments upwards in fixed milk price was made in the range 0.06c/litre to 1.29c/l. In terms of milk price adjustment, the Glanbia actual annual average weighted price went below the threshold set out in the terms and conditions, so the fixed milk price paid out has to be adjusted downwards.

Speaking to the Irish Farmers Journal this week, director of strategy and supplier relations Sean Molloy admitted that taking the clawback without informing farmers was a mistake and openly apologised to all farmers. He said: “Even after the clawback, the milk price in the fixed scheme is still 6.25c/l ahead of the price for milk not in the scheme. Since 2011, over seven schemes and 1.1bn litres have been fixed and on average the milk price in the scheme will be 2.2c/l above the market price.”

He said he would look at a system where monthly adjustments could be made when extreme changes in milk price occur which would then be corrected at year end.

Molloy also confirmed that the base price used is inclusive of the co-op top-up.