It’s been a demoralising week in this part of the world, with the Glanbia announcement that we are entering the realm of effective quotas on milk production again from next year on.
It is overshadowing everything else on farm, and dominating all discussions between milk suppliers for the last week.
We are still waiting for some detail on this announcement, but all the back of the envelope calculations done so far indicate it will take a significant shift in system and therefore a significant addition of cost for farmers to come in under the limits on peak milk production set by this new regime.
Some people are very exposed
This is a huge blow to farm families in the Glanbia catchment area whose business plans and cashflow projections have gone up in smoke overnight. Some people are very exposed, having just completed long-term land leases or purchases or recently made huge investments in dairy infrastructure, often with a young person coming home to join the family business.
There was no indication when milk supply agreements were signed in good faith that processing capacity would become an issue over the next few years. There was no charge on new milk or expansion milk and no indication whatsoever from the board or management of GII that this would cause any problems through growth.
The milk was to be produced with no restrictions and full assurances given to the suppliers that there would be stainless steel in place to process it.
We now learn that the planning objections, lodged by An Taisce, were not foreseen and the delays caused have left milk suppliers in a precarious position. The board and management would have been acutely aware of deadlines being missed and very aware that we had passed the point of no return months ago.
We needed strong leadership around the board table at this time
Even if the latest decision had been favourable, we were still offside with peak processing capacity for the next two years.
We needed strong leadership around the board table at this time. There was a duty of care to the milk suppliers they represent. The issues should have been communicated to suppliers at the earliest possible opportunity. Some of the pain could have been lessened.
Instead we got a lot of procrastination, hand wringing and gnashing of teeth. We also, eventually, got a solution that only affects the costs of the milk supplier and has no material effect on the company. We are told it will maintain its processing margin at north of 3.2% PAT and indeed our farmer representative chair believes the margin should be higher.
They have also shown no empathy toward the farm families whose livelihoods have been hugely affected by this situation
The board and management have shown no remorse for letting the situation deteriorate to this extent before communicating the reality to the supplier base. They have also shown no empathy toward the farm families whose livelihoods have been hugely affected by this situation and the families whose farms have been put in a precarious position by the new production restrictions.
Instead when challenged by the Irish Farmers Journal team on a live webinar on Tuesday, we got a PR message, extolling the virtues of the company, lauding its achievements in growing the milk processing capacity over the last seven years and absolving itself from any responsibility or blame.
Joe Patton had an excellent presentation on the significant financial and time costs that will be incurred by the milk suppliers to implement the system change needed to comply with the new regime.
The vast majority will not be affected we were told, and most only need to move calving date a month either way
This was dismissed by our chair who showed a distinct lack of ability to grasp the seriousness of the situation for the supplier base.
The vast majority will not be affected we were told, and most only need to move calving date a month either way. This is not the case. The financial impacts for a large number of suppliers are immense and will put a lot of farm families under extreme pressure over the next three years.