Dairygold has ruled out offering specific financial supports to suppliers with large milk volumes tied into fixed milk price (FMP) schemes.

The co-op also rejected an Ornua proposal to support farmers in FMP schemes on the grounds that it offered a “minimal level of funding” and tied farmers into another FMP deal at too low a price.

In a letter sent last week to suppliers, Dairygold insisted FMP schemes were contracts that had to be honoured.

“We believe that contracts form the basis of all relationships with milk suppliers, customers and all stakeholders, and must be honoured to ensure certainty for the society into the future,” Dairygold said.

The co-op insisted that rather than offering dedicated supports, its focus was on paying “the maximum milk price to offset the downside” of FMP schemes and it pointed out that the current milk price of over 50.5c/l was around 15c/l ahead of the 2021 average.

Proposal

Dairygold also confirmed that it was not progressing with a proposal from Ornua for amending its FMP arrangements.

It stated that Ornua, which underwrites Dairygold’s FMP schemes, had proposed providing supports of less that 1c/l on all 2022 milk volumes included in FMP schemes.

However, the Ornua support was conditional on Dairygold suppliers committing to additional FMP volumes at 42c/l for 2023.

“The FMP price of 42c/l offered by Ornua for 2023 is significantly lower than the current market expectation, so a milk price in 2023 of greater than 42c/l will see Ornua recoup all or a significant portion of its support offered this year,” Dairygold insisted.

“In other words, Ornua are only prepared to work with Dairygold on a cashflow basis with a minimal level of funding offered. On this basis, the Ornua offer is not being progressed,” the letter added.

€4m in supports

Ornua CEO John Jordan recently claimed that the business had pumped an estimated €4m into supporting FMP schemes operated by its member co-ops.

Dairygold urged suppliers with “working capital issues” to immediately contact their area adviser or area sales manager to “address the issue”.

Close to 340 of Dairygold’s suppliers have around 20% of their milk volumes linked into two FMP schemes.