Henry Corbally has just been re-elected as chair of Glanbia Co-op, Glanbia Ingredients Ireland (GII) and Glanbia plc. He is set to embark on his second year in one of the most high-profile roles in Irish agriculture. The Co Meath dairy farmer’s first year was not a straightforward one by anyone’s estimation.

Corbally sat down at his farm with the Irish Farmers Journal this week to discuss his first year, a challenging global dairy market, the co-op’s relationship with tillage farmers, corporate governance of dairy boards and the future of mergers in the sector. Corbally took up the prestigious role at a time of great uncertainty in milk price and continued troubles in the tillage industry in Ireland and abroad. There were also concerns over the jewel in Glanbia’s processing crown, the Belview facility in Co Kilkenny.

Milk price

The price of producing a litre of milk has been rarely out of dairy farmers’ minds over the past 18 months. Prices have fallen back from an approximate base of 35c/litre to approximately 22c/l at present.

Glanbia has borne the brunt of farmers’ anger over being consistently near the bottom of the Irish Farmers Journal monthly milk league. Despite having the largest milk pool in the country, Glanbia’s base price has been lower than most. Corbally said at a time of a dairy downturn, scale does not help.

I’m confident we will perform very well in the KPMG ranking for 2015 when it is published shortly

“I don’t accept that claim,” Corbally said. “The only league we judge ourselves on is the annual milk price review by KPMG which takes into account all money paid for manufacturing milk in a full calendar year. I’m confident we will perform very well in the KPMG ranking for 2015 when it is published shortly.”

Corbally said Glanbia will continue to support milk price but offered no indication as to when the global dairy market will recover.

“How long is a piece of string,” he said. “We feel very often that our price is not comparable with other co-ops … the GII price is being compared with co-ops who support price. We just enumerate exactly what our support [from Glanbia co-op] is,” Corbally said.

Forecast

Corbally said that in 2011 Glanbia began working with its suppliers to forecast milk production growth. The response was that its 5,000 suppliers were forecasting a collective 50% increase in milk production. Twelve months on from quota abolition, the milk pool has increased by almost 30%.

We have processed every litre of milk, nobody had milk sent back and that’s very important. We have planned for milk expansion and farmers are following through

“A year and a half ago, the country was at full capacity – there wasn’t room for another gallon of milk. We have processed every litre of milk, nobody had milk sent back and that’s very important. We have planned for milk expansion and farmers are following through,” he said.

This growth in capacity coincided with the opening of Glanbia’s €185m powder processing facility in Belview. Rumours, hearsay and innuendo surrounded Belview’s ability to process milk.

“Belview is working very well now and we’re putting a lot of product through and there are no problems.

“We opened a new plant in New Mexico a number of years ago and there were lots of commissioning issues but just nobody from Meath or Waterford heard about those ones,” Corbally joked.

Co-op shareholding

Glanbia Co-op currently holds 36.5% of the shareholding in Glanbia plc, worth approximately €1.7bn. The board of the co-op has the discretion to reduce its shareholding to 33%, but to go below that would require a decision of the shareholders. The Glanbia co-op also owns 60% of the GII’s milk processing assets. Corbally said a decision to increase this would also rest with shareholders.

“We have the reserves to control more if the shareholders wanted to. That’s not a big corporate decision, that’s a decision of our shareholders,” Corbally said. But he does not expect a decision on this any time soon.

We have serious control within the co-op of our own milk processing asset

“In the short term, people are concerned with their immediate own viability. It would take a time of more calm in the market for people to step back and make a decision.

“We have serious control within the co-op of our own milk processing asset. We are very proud of that and we are very aware of that. If the plc had continued to buy more of the processing side of the company then I think that would’ve been a mistake because we couldn’t go back from that,” he said.

As well as considerable expansion from Irish farmers, Glanbia has seen growth through its footprint in the US. Its total milk pool stands at 6bn litres with almost 4bn litres coming from its bases in New Mexico and Idaho. Is the time coming when there will be US farmer directors on the boards?

“I don’t think there’ll be a farmer from Idaho or New Mexico certainly in the short term,” Corbally said, although he explained that the Glanbia plc board has an American representative.

Tillage

Glanbia is the biggest buyer of grain and the biggest seller of animal feed in the country but it rarely reaches the highs of being a market leader in terms of grain buying from tillage farmers.

This continues to be a sticking point for many tillage farmers who supply Glanbia with grain. Corbally said the co-op offers more to the farmers it buys grain from than other buyers.

Listen to Henry Corbally's views on tillage and director's fees in our podcast below:

“We’ve had three bumper harvests in the last three years and there have been three bad price years too. The tillage farmer is, more than anyone, exposed to the world market for his or her product. It’s very hard to understand how many of them even survive because the margins are very, very low.

“We have done as much as anyone to support our tillage farmers. We have brought in supports from the co-op.

“About 40% of our purchases from our suppliers go into premium product. That’s higher than anyone else. We buy a whole stable of premium products from our suppliers,” Corbally said.

He did express concern for the future of the tillage sector in Ireland after three years of diminishing returns.

“In saying that, it is a very difficult business. People have survived by growing scale. Scale in itself is not an answer if a business is not making money,” he said.

Liquid milk

The liquid milk market in Ireland has seen a considerable contraction in terms of the number of suppliers producing for the market. Of the country’s total dairy supplier pool, just 10% are now milking cows around the calendar. Despite that, those approximately 1,800 farmers are producing some 475m litres of fresh milk for the domestic market.

Glanbia has been active in the domestic liquid milk market in recent years and holds approximately 40% of the domestic market.

Three years ago, it secured the contract for the full supply of Tesco’s own brand milk but earlier this year it lost out a large proportion of it to Arrabawn and Aurivo. Price is understood to have been a contributing factor.

Does this type of intense market competition result in a race to the bottom on price point and is it ultimately bad news for liquid farmers?

We have looked at the whole own-brand market in Ireland and there’s nothing in it for everybody and it’s an absolute race to the bottom

“It’s not a race to the bottom because Glanbia has stayed in it. Almost everybody has abandoned the branded market. Glanbia has stayed committed to the branded market. It is the key to where a continuation of a liquid business is. We have looked at the whole own-brand market in Ireland and there’s nothing in it for everybody and it’s an absolute race to the bottom,” Corbally said.

Criticisms have been levelled at liquid and winter milk farmers here for being inefficient, with the larger farmers likely to favour a move to manufacturing milk now. Corbally said numbers will remain in the sector.

He added that there is a constant “push-pull” relationship between Glanbia and farmers on what the bonus price is. After seeing autumn calf births fall in recent years, Corbally said: “Glanbia is very committed to the liquid business … and farmers on the ground believe that there is a future.”

Disaffected farmers

For a group of farmers in the outlying parts of Glanbia’s territory in the northeast, there has been much anger since the push to sign up all suppliers to a five-year milk supply agreement (MSA).

Does Corbally accept that pushing MSAs was not going to be to everyone’s taste?

“Of course and I for one, when becoming chairman, vowed to do everything in my power to bring all people on board. Most from the northeast co-ops have come on board as members now and we have 700 new members in the last year or so,” Corbally said before adding that 98% or 99% of all suppliers have signed an MSA.

He admits that the MSA has not been to everyone’s liking, but argued that they were a necessary tool at the time.

“The MSAs were very much a product of the transition from the quota to non-quota environment,” Corbally explained.

“We were spending a lot of money on building new plants and bringing in new customers and we needed to be able to tell our bankers and our customers that we would have the supply to meet the contracts we were entering into.

“The MSAs were a product of the time and it’s possible that, in the future, they will be of a shorter duration. There’s nothing wrong with that. That’s not to say that people shouldn’t have a free choice. They should [have a free choice] when the time comes to it and the thing has settled a bit,” he said.

Mergers

The dairy industry in Ireland is plagued with criticisms for being too inefficient due to the large number of co-ops and processors on the island. Corbally is convinced that further mergers will occur but it depends on the shareholders of each co-op.

“I think we will [see more mergers within 10 years]. I think there are some obvious cases for mergers out there even now. [The Glanbia deal with Wexford creameries] was a very obvious case and a good prototype on how it can be done, but it all depends on whether shareholders in the different co-ops want mergers. That will dictate the agenda,” Corbally said.

Pay

The issue of directors’ pay has risen to the fore in the past month since the publication of co-op accounts. The Irish Farmers Journal revealed that the directors of Glanbia co-op received €85,000 per annum, with Henry Corbally, as chair, receiving €188,000

Until now, the plc remuneration was all that was known. Last year, the Irish Farmers Journal reported that the then chair Liam Herlihy received €105,000, the two vice-chairs half that – €52,500 – with the other 11 board members getting €35,000 each.

It has now emerged that the directors receive a higher combined payment from the plc and the co-op for their various roles in Glanbia plc, Glanbia Co-op, and GII. GII is the milk processor owned jointly by co-op and plc on a 60/40 basis.

Corbally said the roles the directors of Glanbia carry out are of immense importance and require a huge level of responsibility and oversight.

“The organisation is built on a very democratic structure. The three organisations within Glanbia [the co-op, the plc and GII] is a very serious business. When you become a director, you take on a responsibility ensuring that the company trades in a responsible manner.

“We have to ensure that everyone is paid at the end of the month or the end of the year and that responsibility lies with the directors,” Corbally said.

He added that the directors attended approximately 50 meetings in 2015 with the directors receiving no additional expenses for labour replacement or other costs incurred from doing the job.

Being a director “is a great responsibility on a small number of people for a very large shareholding … it is a great honour and privilege to do so”, he said, before adding that farmers have a “respect and regard for their direction” but they receive “plenty of criticism” to ensure that standards are maintained.

On corporate governance and the standards of farmer directors on boards, Corbally, who has completed a diploma in corporate governance, thinks that all co-ops do not do “enough to educate” on all the relevant issues, but said there is also a responsibility on local committees to nominate the “best people” to go ahead for board selection.

Corbally is in one of the highest-profile farmer jobs in the world.

As well as running the 110-cow herd in Co Meath, he is chair of the three bodies in the country’s largest dairy entity.

“I like farming and I like farm politics. I have been involved in representing farmers since I came out of Warrenstown [agriculture college] when I was 20 and became chair of my local [IFA] branch.

“If there’s a bit of a row about anything to do with farming at any meeting, I’ll be there to back the farmer,” Corbally concluded.

Henry Corbally

Title: Chair of Glanbia Co-op, Glanbia plc and GII.

Age: 61.

Farm: 60ha.

Interest: Football, racing and hunting.

System: 110 cows producing liquid and manufacturing milk.

Family: Married to Edel with three children – Lisa, Harry and Richard.