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The most interesting element of this scheme is the feed loyalty bonus or rebate of €30/t. This amounts to a saving of around 0.3c/litre for a 100-cow farmer buying 50t of meal.
Glanbia is ring-fencing 25,000t/year initially, which means savings of €750,000 will be awarded to dairy farmers annually.
Competing merchants, co-ops and farmers will ask where this money is coming from. After all, the feed business is a 2-3% margin business and Glanbia is offering a 12% discount on a €250/t feed. So where is the €30/t coming from? It is important to understand it is not coming from the power of the plc or the co-op supports.
Listen to an interview with Glanbia's director of milk supply strategy Sean Molloy in our podcast below:
As the largest feed processor in the country, processing some 400,000t of feed, Glanbia says that increased efficiencies at its feed mills through economies of scale will deliver savings while improved planning and more efficient distribution will also contribute.
However, other farmers may believe they are subsidising dairy farmers who participate in this scheme. The natural question from beef and sheep farmers is will they be subsidising this price? And tillage farmers may wonder will it come from taking a lower price for native grain?
If a farmer is locked into Glanbia as their sole feed supplier, the option to ring around and negotiate is eliminated. This makes it difficult to verify the market price and get the best deal.
In the past, farmers left their own co-ops for various reasons, allowing independent feed merchants to spring up that offered better value (either perceived or otherwise) to farmers. Many farmers will also remember the requirement to purchase fertiliser from the Sugar Company/Greencore. Both of these examples ultimately show that farmers value independence and the choice of the free market.
31c/l for up to five years from Glanbia and Kerry
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