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Only two of our milk processors, Lakeland and LacPatrick, have said to their shareholders that they don't want their suppliers to have a minimum number of shares in their co-op. Kerry milk suppliers also don't require a minimum shareholding and Kerry has told suppliers that the group will pay for any future investment in milk processing if it is required.
The rest of the co-ops have set in place and are enforcing share-up in their co-op to the required level as detailed in Table 1. Most of the co-ops are willing to spread the share-up investment over a number of years to lessen the burden on cashflow.
Arrabawn
Arrabawn has a set minimum standard that every supplier is to have 1,500 shares per 100,000 litres supplied. Share standard can be built up over three years if required.
Aurivo
Share standard is 3,000 shares per 100,000 litres. On average, the starting point was about 0.5c/l per supplier.
Tipperary
Share standard is 3,000 shares per 100,000 litres supplied. There is no fixed term to have fully shared up in co-op.
Glanbia:
Existing share standard was 1 share per 115 litres or 870 shares per 100,000 litres. Under the new structure, the minimum share standard is 2,000 shares and non-shareholders can purchase shares.
Dairygold
Dairygold Co-op has asked its members to fund part of the equipment expansion to the tune of €50m and the remaining cost of expansion will come from bank borrowings and cashflow. In Dairygold Co-op, the year-to-year financial impact of signing milk supply agreements will vary depending on how much your milk supply grows, shareholding owned and what your base milk supply was between 2010 and 2012.
Kerry
Kerry has no minimum share contracts but has restrictions on the overall volume of milk that a supplier can produce. The limit is 120% of the quota owned in 2015. It also has a very long contract duration - 10 years.
Carbery
Like the rest of the co-ops, Carbery has a minimum share standard and this varies depending on the growth in your supply. They also have a limit on the volume of milk a supplier produces and this is restricted to 140% of the quota owned in 2015, mainly due to the fact processing capacity is limited at its plant in Ballineen.
Tipperary
Tipperary Co-op, similar to Aurivo, has a minimum 3,000 shares per 100,000 litres supplied share-up standard.
Lakeland:
No minimum share-up required.
LacPatrick:
No minimum share-up required.
Comment
As we have already explained on numerous occasions, those farmers investing in co-ops need to have a right to know where shareholders' money is going to be spent and what will be the expected return. They also need to know the big picture plan for the co-op on proposed investments and marketing in coming years. There is little point to farmers investing in a sinking ship if they can supply another processor that has a clear vision for the future in terms of processing, investment, sales and projected profits. There is no doubt that each supplier, if investing in shares and revolving funds etc, should sit down and go through a one-to-one meeting with management to see what will be the impact on their farm for their own investment plan.
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