Glanbia Co-op is to issue milk payments twice per month from July, in an effort to support farm working capital requirements.

In essence, suppliers, who previously received 100% payment on the 18th of the month for the previous month’s milk, will now receive 100% payment in two instalments concluding on the 25th of the month.

The change allows the co-op board to factor in market dynamics, both price increases and decrease, that occur during the month.

However, the move may interfere with farmers’ scheduled standing orders, direct debits and bank repayments.

Farmers are being advised to check their banking arrangements to ensure they are aligned to the new payments structure.

As farmer overdraft utilisation is currently reported to be at low levels by the main banks, many farmers may not see challenges in their current account immediately.

Ensuring a smooth transition

Donal Whelton, head of agriculture at AIB, advises milk suppliers to check their banking arrangements to ensure a smooth transition to the new process.

“Some milk suppliers may need to consider adjusting the timing of some of their deductions or make some changes to their banking facilities in order to align with the new schedule.”

Depending on the number and type of transactions going through your current account and their schedule within the month, the following may need to be reviewed:

  • The date on which a standing order is deducted.
  • You may wish to change the date on which direct debits take place for third-party bills, such as utilities, insurance and other services – these would need to be changed at source by contacting the company that is deducting the payment.
  • Loan agreements – if you need to change the date of a loan repayment, you should contact your local branch, or your bank’s relationship manager.
  • Whelton noted that reviewing working capital facilities in place on your current account may be the only action required.

    Co-op cashflow

    As 50% of deductions will now be taken earlier than before and 50% of milk payments will be made later, the plan is likely to have a flattening effect on the co-op’s cashflow, as well as endeavouring to support farm cashflow.

    Where loan repayments are out of sync with milk payments, realigning them to suit the farmer may necessitate the generation of a new letter of offer by the bank, possibly subject to new lending terms and conditions.

    However, as this move is running on a six month trial basis, some farmers may be hesitant to make changes.