Shocknotice to United

Ballyrashane Co-op to buymilk directly from members

The 'end game' of the deregulation of milk marketing in Northern Ireland could be played out during the next 12 months following a surprise decision by members of Ballyrashane Co-operative.

They have decided that the business should buy milk directly ex-farm rather than continuing to source their members' milk through United Dairy Farmers.

This significant change is planned to take effect from the beginning of January next year, which leaves 12 months in which much can happen.

Ballyrashane immediately informed United of the decision and it has been left to individual members to send notices to United of their intention to cease supplying milk to United Dairy Farmers.

Almost all of the 60 members of the Ballyrashane Co-op were at the meeting last week but not all have so far sent notices to United.

The milk supply contracts with United impose penalties on members terminating milk supply with less than 12 months' notice.

Immediate withdrawal invokes a penalty of 6% of the past year's milk payments. The penalty drops to 2% if United is given three months' notice, 1.5% if given six months and 1% if the notice is nine months.

On enquiry by the Irish Farmers Journal, United group chief executive David Dobbin said that notices had come from quite a percentage but by no means 100% of the Ballyrashane members.

Dobbin said that he was disappointed at this turn of events but he did not think that it would have any major effect on United. He was surprised at the timing of the decision as member satisfaction within United is currently high. It has been a good stable period for United, with very few resignations and some new members joining.

Ballyrashane chief executive Nigel Kemps said the decision had been taken in the best strategic interests of Ballyrashane.

He added: ''Ballyrashane has enjoyed a good working relationship with United Dairy Farmers and, indeed, we would like to see this continuing in the future.

''However, it is important that we act at all times in the best commercial interests of co-op members and it is our resounding view that having our own milk pool is undoubtedly the right way forward for our shareholders as individuals and for the co-op as a whole. ''Having our own milk pool not only makes our business more financially robust but clearly affords us more control and greater security of supply, thereby protecting our customer needs. This business model has worked well for other dairies and we believe it will further consolidate our position in the marketplace.''

On the possibility of Ballyrashane Co-op buying milk from producers who are not currently members of the co-op, Kemps said that he could foresee some beef farmers in the local area switching to milk production and these could be potential new suppliers.

He would not be drawn on the matter of producers who are non-members of Ballyrashane and who currently supply milk to United or to other processors. He simply commented: ''While we reserve the right to do what is in the best interests of our shareholders at all times, the company is also willing to talk to potential new milk producers within our locality.''

In practice, Ballyrashane's actions on this front will depend on the level of supply of milk that they need to maximise the efficiency of their operation and the volumes available to them from other sources such as United Dairy Farmers, from whom they currently have an allocation of option milk in addition to milk bought through the monthly auctions.

The future allocation of 'option milk' from United to Ballyrashane may be affected by the decision to source milk directly from members.