Glanbia restrictions: major issues remain

The impacts of the new Glanbia peak milk supply restrictions are being felt far and wide.

While the positive outcome of the judicial review into the granting of planning permission for the new cheese plant has been welcomed, there is still no certainty on when, or indeed if, that new plant will be built.

Farmer anger at the restrictive measures remains. At this stage, all suppliers in Glanbia, Centenary, Callan and Mullinahone co-ops will have received letters detailing their penalty-free allowance for milk supply during the peak milk months in April, May and June 2022 to 2024.

The Irish Farmers Journal continues to be contacted on a daily basis by those who are affected by the new restrictions.

Some real-life case studies are highlighted in this article.

This young farmer is farming alongside his father and they have recently increased cow numbers.

Prior to expansion, they were milking 90 cows but milking and housing facilities were poor. However, they had a relatively large land base around the farmyard.

A business plan was drawn up to gradually increase cow numbers from 90 in 2018 to 140 by 2022. They are milking 130 cows for 2021.

Significant investment was made in the yard to make the farm environmentally compliant and a better place to work.

A total of €700,000 was borrowed over a 15-year term to fund the development work.

Annual repayments (capital and interest) are €64,000 per year. The money was used to build a new milking parlour and handling facilities, cubicle and calf shed, silage slab and grazing infrastructure. The farm didn’t get any investment for the last 30 years and won’t need investment for another 30 years.

By next year, the farmer expects to supply 100,000l in April, 110,000l in May and 140,000l in June (figures have been rounded). However, his Glanbia allocation for 2022 under the new restrictions is for approximately 70,000l in April, 80,000l in May and 97,000l in June.

Any milk supplied above this is liable for penalty – either a 30% reduction or a charge for taking the milk.

The total amount of milk this farm intended to supply in 2022 that is subject to penalty is 103,000l.

This will lead to a penalty of €10,815 if a 30% penalty is charged at a 35c/l milk price. Depending on whether Glanbia can process the milk, that 30% penalty could turn into a charge for taking and disposing of the milk. If this happens, the cost to the farmer of not getting paid anything for the milk is €36,050 at 35c/l.

Potentially, if he supplies the milk, Glanbia could charge him 10c/l for collecting and disposing of it. If that happens, not only will the farmer not get paid for the milk he supplied but he will be charged €10,300, so the total cost could be over €46,000 before the cost of production is even looked at.

If this were to happen, it would put the farm under significant financial pressure despite the fact that the increase in cow numbers has not been massive.

The farmer is understandably angry that things have come to this. He intends to apply to the reserve pool for additional milk allowance, but he says the communication around when he can apply and when he will know if he is successful has been poor.

This Munster-based discussion group has nine members who supply milk to Glanbia.

Each of the Glanbia suppliers is affected by the new peak milk restrictions, to varying degrees.

Three members of the group are severely affected as they are in the process of or had planned to make significant expansion through taking on additional land.

The other six members had not planned to take on more land but are still affected. In total, the nine farmers had expected to grow output by 13% between 2021 and 2024 but are now restricted to growing by a total of 6%.

The main reasons highlighted why milk output is expected to increase are increasing age profile in the herd and improved genetic gain.

In the majority of cases, increasing cow numbers was not a factor in increased output.

The average six-week calving rate within the discussion group is 82%, whereas the Glanbia average is 68%.

The farmers supply just 0.3% more than the Glanbia average supplier in June, but supply 0.9% and 0.6% more than the average in April and May, respectively.

As a result, the members are on a slower growth trajectory than those supplying less than the Glanbia average, even though they have a much flatter supply curve than the average supplier.

The three more severely affected members of the group will apply to the reserve fund.

The other members are still deciding on what to do.

None of the members are considering changing calving date as a way around the problem.

Two neighbouring farmers are milking approximately the same number of cows and have the same peak milk supply volume.

One farmer feeds his calves milk replacer while the other feeds whole milk. While both farmers supply the same volume of milk during the peak months, the farmer feeding whole milk has a higher peak supply because he supplies less milk in spring. As a result, he has a higher than average supply curve and so is on a slower growth trajectory than the farmer who fed milk replacer.

Two neighbouring farmers have the same annual milk supply volume. Both have 2020 as their reference year. One farmer’s milk was collected at 3am on the first day of April and at 11pm on the last day of June. The other farmer’s milk was collected at 11pm on the last day of March and 3am on the first day of July.

The first farmer’s milk supply profile is 2.5% higher than the other’s and he is now above the Glanbia average and is on a slower growth trajectory than the farmer who got the benefit of fewer milk collections in the reference peak period.

1 When are applications opening for the reserve pool and when will applicants know if they have been successful?

2 How come farmers are shouldering all of the costs involved – the Glanbia Ireland profit target is not being adjusted and the plc (which owns 40% of Glanbia Ireland) is making no financial contribution to the various schemes.

3 Why is the “bonus” being applied to winter milk? Why can’t it be applied to milk produced off-peak, such as in March, July, August, etc?

4 When will farmers know whether extra milk supplied in the peak months from next year will be subject to the 30% penalty or charge for disposing?

5 Will the anomalies surrounding the calculation of the peak reference (see case studies C and D) and its impact on future growth trajectory be sorted out?

There are also issues around the movement between years of the start and end of the peak period and how this can affect a farmer’s peak reference.