Details of how much milk farmers can supply to Glanbia without risk of penalties, deductions or charges were sent to farmers earlier this week.
The letters contain a number of tables relevant to each supplier. These tables include historic annual supply and base reference amount per month.
The base reference amount is based on the monthly milk supply in the year with the highest peak milk supply.
From this, the historic supply profile is calculated and is based on the milk supplied in each of the three peak months as a percentage of the overall supply in that year.
This is then compared to the Glanbia average peak supply curve. Farmers are treated differently depending on whether their supply curve is greater than or less than the average supply curve.
Averages
Effectively, if a farmer produces more than the average in any peak month, his or her supply profile is no longer used when calculating their future growth allowance.
Instead, the Glanbia average for each month is used and this is multiplied by the total volume produced in the highest annual supply year between 2018 and 2020.
Farmers are permitted to grow their supply by 10%, 5% or 2.5% depending on how much milk they supply annually.
The threshold for 10% growth is less than 400,000l, the threshold for 5% growth is 550,000l and any supply above this is permitted to grow at 2.5% per year. These are compound annual growth rates and they include 2021 as a growth year.
Case study one: high peak in June
In this case study the farmer supplies 15.2% of his milk in June, while the Glanbia average is 14.7%, therefore he is 0.5% above the average.
Their supply is below the average supply curve for April and May and so can increase supply by 2.5% (as they produce more than 550,000l annually) on his reference volume for 2021, 2022, 2023 and 2024.
However, because the farmer supplies 0.5% more of milk than the average Glanbia supplier in June, the actual reference volume for June is reduced to the Glanbia average which is 14.7% of total annual supply.
Therefore, the new allocation for June 2022 is just 1.5% higher than what they supplied in the reference year, 2020.
The new allocation for 2023 is 2.5% higher than 2022 and 2024 allocation is 2.5% higher than 2023.
Case study two: compact calver
In this case study the farmer supplies 12.1% of their milk in April, 12.6% in May and 13.9% in June. The April and May supply is higher than the Glanbia average and so the reference volume for both months is being reduced to reflect the Glanbia average.
If it was only April that was higher than the average the reference would not be deducted, but as May is slightly above the average (by 0.1%) the reference is being reduced for both April and May.
Their new allowance for April 2022 is 2.4% higher than the actual volume of milk he supplied in April 2020 which is the reference year. The new allowance for May 2022 is 3.7% higher than the actual volume of milk he supplied in May 2020 while June 2022 is 5% higher than the reference volume.
Case study three: April peak
In this case study the farmer supplies 12.7% of their annual supply in April and 12.1% and 14.5% in May and June respectively. While they exceed the average Glanbia supply profile in April, they are under the average in May and June.
The Glanbia letter states that the supply profile indicated an April peak (it’s not actually a peak) and May and June supply is at (or within 500 litres) or below the Glanbia average, so the April allocation was increased to avoid adjusting the supply profile.
This was introduced so as not to overly penalise farmers who supply more milk in early spring.
Case study four: winter milker
In this case study the farmer is a spring-calving farmer who milked through the winter for the last two years in order to improve cash flow.
As a result, the amount of milk supplied in the peak months is a smaller proportion of their overall milk supply. April supply is 11.3% of overall supply, May is 12% of overall supply and June is 13.5% of overall supply.
All three months are lower than the Glanbia average supplier so this farmer can supply 5% more milk than the reference amount for all three peak months in 2022 and avail of a 2.5% increase for 2023 and 2024 respectively.
Case study five: high peak supply
In this example, the farmer supplied more milk in 2019 than in either of the other two reference years. However, their peak supply was highest in 2020, when they supplied 12.4%, 13% and 15.6% of total milk in April, May and June respectively. Each of these is higher than the reference amount and so the supplier’s growth curve is being reduced to the average Glanbia supplier’s growth curve.
The new reference volume for each peak month is based on the Glanbia average supply profile for each month of 2019 supplies.
Their new reference volume for 2022 is now almost identical to what was produced in 2020. They can also avail of the 2.5% compound growth in 2023 and 2024.
Details of how much milk farmers can supply to Glanbia without risk of penalties, deductions or charges were sent to farmers earlier this week.
The letters contain a number of tables relevant to each supplier. These tables include historic annual supply and base reference amount per month.
The base reference amount is based on the monthly milk supply in the year with the highest peak milk supply.
From this, the historic supply profile is calculated and is based on the milk supplied in each of the three peak months as a percentage of the overall supply in that year.
This is then compared to the Glanbia average peak supply curve. Farmers are treated differently depending on whether their supply curve is greater than or less than the average supply curve.
Averages
Effectively, if a farmer produces more than the average in any peak month, his or her supply profile is no longer used when calculating their future growth allowance.
Instead, the Glanbia average for each month is used and this is multiplied by the total volume produced in the highest annual supply year between 2018 and 2020.
Farmers are permitted to grow their supply by 10%, 5% or 2.5% depending on how much milk they supply annually.
The threshold for 10% growth is less than 400,000l, the threshold for 5% growth is 550,000l and any supply above this is permitted to grow at 2.5% per year. These are compound annual growth rates and they include 2021 as a growth year.
Case study one: high peak in June
In this case study the farmer supplies 15.2% of his milk in June, while the Glanbia average is 14.7%, therefore he is 0.5% above the average.
Their supply is below the average supply curve for April and May and so can increase supply by 2.5% (as they produce more than 550,000l annually) on his reference volume for 2021, 2022, 2023 and 2024.
However, because the farmer supplies 0.5% more of milk than the average Glanbia supplier in June, the actual reference volume for June is reduced to the Glanbia average which is 14.7% of total annual supply.
Therefore, the new allocation for June 2022 is just 1.5% higher than what they supplied in the reference year, 2020.
The new allocation for 2023 is 2.5% higher than 2022 and 2024 allocation is 2.5% higher than 2023.
Case study two: compact calver
In this case study the farmer supplies 12.1% of their milk in April, 12.6% in May and 13.9% in June. The April and May supply is higher than the Glanbia average and so the reference volume for both months is being reduced to reflect the Glanbia average.
If it was only April that was higher than the average the reference would not be deducted, but as May is slightly above the average (by 0.1%) the reference is being reduced for both April and May.
Their new allowance for April 2022 is 2.4% higher than the actual volume of milk he supplied in April 2020 which is the reference year. The new allowance for May 2022 is 3.7% higher than the actual volume of milk he supplied in May 2020 while June 2022 is 5% higher than the reference volume.
Case study three: April peak
In this case study the farmer supplies 12.7% of their annual supply in April and 12.1% and 14.5% in May and June respectively. While they exceed the average Glanbia supply profile in April, they are under the average in May and June.
The Glanbia letter states that the supply profile indicated an April peak (it’s not actually a peak) and May and June supply is at (or within 500 litres) or below the Glanbia average, so the April allocation was increased to avoid adjusting the supply profile.
This was introduced so as not to overly penalise farmers who supply more milk in early spring.
Case study four: winter milker
In this case study the farmer is a spring-calving farmer who milked through the winter for the last two years in order to improve cash flow.
As a result, the amount of milk supplied in the peak months is a smaller proportion of their overall milk supply. April supply is 11.3% of overall supply, May is 12% of overall supply and June is 13.5% of overall supply.
All three months are lower than the Glanbia average supplier so this farmer can supply 5% more milk than the reference amount for all three peak months in 2022 and avail of a 2.5% increase for 2023 and 2024 respectively.
Case study five: high peak supply
In this example, the farmer supplied more milk in 2019 than in either of the other two reference years. However, their peak supply was highest in 2020, when they supplied 12.4%, 13% and 15.6% of total milk in April, May and June respectively. Each of these is higher than the reference amount and so the supplier’s growth curve is being reduced to the average Glanbia supplier’s growth curve.
The new reference volume for each peak month is based on the Glanbia average supply profile for each month of 2019 supplies.
Their new reference volume for 2022 is now almost identical to what was produced in 2020. They can also avail of the 2.5% compound growth in 2023 and 2024.
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