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Glanbia Ireland is introducing charges for the first time for new entrants to dairying and current suppliers who set up an additional dairy unit. The co-op is also changing how it distributes dividends to its members.
Existing suppliers will not be charged once their growth is in line with the average growth planned across the business. For example, if Glanbia Ireland expects to grow supply at 4% per year on average over the next five years, there will be no charge once suppliers grow at this rate also.
New entrants will see a charge of 0.5c/l on all milk delivered annually beyond a 250,000l base. Assuming a 5,000l cow, deducting the 250,000l exemption and looking at a range of herd sizes from 100 to 500 cows, the new levy will cost a greenfield business between €12.50 per cow per year for a 100-cow farmer up to €22.50 per cow per year for a farmer with 500 cows. Over five years, it means the total new entrant levy for a farmer milking 200 cows will cost €94 per cow.
The alternative for new entrants and farmers adding units is to buy inputs from Glanbia
For existing milk suppliers setting up a new unit, the levy increases to 1c/l. Taking the same scenarios, the annual cost per cow is between €25/cow for a farmer milking 100 cows and up to €45/cow/year for a farmer with 500 cows. The five-year cost for a farmer milking 200 cows then moves to €186/cow for an existing supplier setting up another unit.
The alternative for new entrants and farmers adding units is to buy inputs from Glanbia to the tune of over 3c/l in the first year and over 5c/l in years two to five and then no charge will be levied for the new milk.
Dividend distribution
The co-op also plans to change how the dividend from its share in Glanbia Ireland is distributed to members. The dividend amounts to around €18m per year depending on performance.
In 2018 and 2019, this was distributed as a conditional trading bonus to active members. This year, the co-op’s share of the Glanbia Ireland dividend will be split two ways – the usual trading bonus and a new monthly, unconditional payment of 0.4c/l to all milk supplier members on all milk delivered in the year. This will see a farmer supplying 500,000 litres of milk per year receive €2,000 over the year. Based on Glanbia Ireland’s milk pool of 2.9bn litres, the co-op will allocate some €11m to this unconditional bonus.
Trading bonus
The balance of the dividend will be allocated to the trading bonus schemes.
This will reward farmer members of the co-op for purchasing inputs such as feed, seed, fertiliser and chemicals from Glanbia Ireland. It has been in place for the last two years.
For milk suppliers who are members of the co-op, the bonus could be worth up to 0.4c/l on all milk delivered in 2020. This would see a farmer who supplies 500,000l receive €2,000 if the farmer spends over 8c/l or €40,000 per year on inputs. If the spend is between 5c/l and 8c/l, the trading bonus is 0.2c/l, which works out at €1,000 on a spend of €25,000 to €40,000 for a 500,000l supplier.
Non-milk suppliers such as beef, sheep and pig farmers who are members of the co-op will get a discount of €10/t on feed products. A trading bonus of up to €10/t of grain supplied in 2020 is available to grain growers.
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