Comparison of milk supplies agreements

1. Comparison of Milk
Supply Agreements
(MSAs)
Updated February 2015
(Note: some MSAs still in development,
not all Co-ops’ MSAs included)

2. 1 - Duration and
notice?
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Co-op
Kerry Duration: from effective date (2010) to 31/03/15, then no less than 5 years.
Notice – 5 years. Initial duration = 15 years.
Dairygold Duration – 5 years; Notice – 2 years. Initial duration (ID) 7 years. Co-op must
give 5 years notice to farmer.
GIIL Duration – 3 years; Notice – 2 years; ID 5 years. GIIL must give 5 year notice to
non member suppliers
Aurivo Duration – 3 years; Notice – 1 year; ID 4 years
Carbery Share standard, not MSA (West Cork co-ops -> MSA)
Arrabawn Duration – 1 year; Notice – 1 year; ID 1 year
Tipperary Co-op Duration – 1 year; Notice – 1 year; ID 1 year
Lakeland Duration – 3 years; Initial notice – 2 years; ID 5 years. Notice 1 year after ID.
Notice can only be given on 1st Jan of any year after 2018. Co-op has to give
farmer 2 years’ notice.
North Cork Co-op Share standard, not MSA

3. 2 – Share up? How
much?
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Co-op
Kerry No
Dairygold 4c/l (0.5c/l over 7 years or until reached)
GIIL No
Aurivo 3c/l (0.5c/l until reached – avg current shareholding 0.6c/l)
Bonus shares don’t qualify. Levy to start from Jul 14.
Carbery Mini 16 shares/1000l on existing; 25 shares/1000l on new milk post 2015.
Equiv to approx 2c/l and 3.12c/l. These are Carbery shares, not West Cork Co-
op shares.
Arrabawn 3c/l (higher when supplies grow by more than 30%)
Tipperary Co-op 3c/l
Lakeland No
North Cork Co-op 2c/l for quota volume + 40%; 4c/l above that. Producers between 100k and
250k can expand for just 2c/l. 0.5c/l levy from early 2014 to 2018, no levy
when prices <29c/l.

4. 3 – Other financial
contributions?
4
Co-op
Kerry No, but no guarantee of milk price after 120% reached.
Dairygold Revolving fund (0.5c/l x 60 monthly payments provided milk price >27c/l – Nov
2014: mini price increased to 30c/l); Loan scheme (optional); Deferred
payment of 20% of Apr/Sep milk on growth milk post 2015 – postponed till
2018
GIIL No
Aurivo Revolving fund 0.5c/l over 50,000l when price >29c/l. 15% of supplies
>250,000l also exempt from RF. Levy to start Jan 15.
Deferred payment of 20% of May/Sep milk on growth milk post 2015 – to be
paid Jan of foll. Year. Feb 2015: Revolving fund postponed for one year.
Carbery No, only sharing up
Arrabawn No, only sharing up
Tipperary Co-op No, only sharing up
Lakeland No
North Cork Co-op No, only sharing up

5. 4 –Volume
restrictions?
Forecasts?
5
Co-op
Kerry 120% of 31/03/15 quotas gets “leading milk price”. No guarantee above that.
Dairygold No restriction, forecast 3 years ahead +/- 10%. Penalty if undershoot
GIIL No restriction, forecast 3 years ahead, no consequences
Aurivo No restriction, forecast but no consequences
Carbery MSA with co-ops – not yet developed
Arrabawn No restriction, forecast 12 months, no consequences
Tipperary Co-op No restriction, forecast 12 months, no consequences
Lakeland No restriction, no forecast requirement
North Cork Co-op N/a

6. 5 – Specific milk price
commitment?
6
Co-op
Kerry “Leading milk price”, complex formula decided and assessed by Kerry. No
outside scrutiny/benchmarking.
“Leading milk price” not guaranteed for milk >120% of quota.
Dairygold No, as previously to be set by Board
GIIL Minimum 1c/l profit over costs (extending JV commitment)
Aurivo Benchmark against rolling average IDB PPI. Aurivo price to stay ahead.
Carbery No, as previously to be set by Board. Co-op MSAs still outstanding.
Arrabawn No
Tipperary Co-op No
Lakeland Will endeavour to pay competitive milk price having regard to market
conditions. Will be determined by Board.
North Cork Co-op N/a

7. 6 –Exclusivity? (all
milk to co-op – this is
standard co-op rule
provision)
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Co-op
Kerry Yes
Dairygold Yes
GIIL Yes. However, allows dual suppliers to continue, but same proportion of
growth milk to GIIL
Aurivo Probably (MSA not available yet)
Carbery n/a – MSA with West Cork Co-ops
Arrabawn Probably (MSA not available yet)
Tipperary Co-op Yes
Lakeland Yes. For dual suppliers, same proportion of growth milk to Lakeland.
North Cork Co-op As per co-op rules
Note most/all co-ops provide exemption for own use and own processing

8. 7 –”Improvements”
from consultation?
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Co-op
Kerry Some indication of possible flexibility re price above 120%; “leading milk price” was a
long fought for concession.
Dairygold Penalty for non signature abandoned; longer time for sharing up for farmers whose
parents had retained shares; price below which no levy up to 30c/l
GIIL Duration/notice periods reduced; price commitment; no compulsion, but suppliers to be
encourage to share up; seasonality penalties suspended pre-15
Aurivo Higher mini price for RF levy; earlier repayment of deferred payment; increased level of
exempt supplies for RF; later start for RF levy (Jan 15 – now postponed by further year);
milk price commitment re. IDB PPI.
Carbery MSAs with co-ops, consultation ongoing
Arrabawn MSA consultation ongoing
Tipperary Co-op Agreement is minimal
Lakeland Shorter duration; no link/obligation to purchase inputs from co-op;
North Cork Co-op Agreement is minimal

9. 8 – To sign or not to
sign?
• MSAs are desirable in principle, and offer the farmer
important guarantees: greater clarity on volumes to allow
farmer and co-op to invest appropriately, and at the right
pace; improved customer confidence in security of supply;
security of tenure for farmer through commitment by co-op;
greater receptiveness by banks when seeking credit…
• MSAs are coherent with the principles of the EU Milk
Package (measures included in the new CAP to protect
farmers and strengthen their hand in the market)
• Duration/notice: cuts both ways, you commit to supplying
for the period, but the co-op commits to buying your milk
• Some MSA are more challenging as they require financial
contributions: how clear are you about how this will be
spent? How convinced are you of the quality of your co-
ops’ plans?
• Failing to sign could exclude you from certain bonuses or
options
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10. 9 – To sign or not to
sign? You decide!
• Milk price commitment. Apart from GIIL (mini 1c/l profit over
costs as per JV commitment), Kerry (“leading milk price”)
and Aurivo (link to IDB PPI), most MSAs reiterate co-op rules
(price set by board “from time to time”).
• Expecting a specific price level is unrealistic in a volatile
market, except for fixed price contracts or other hedge.
• Expecting a commitment from one’s co-op through better
efficiencies, merger/co-operation and marketing to return
the maximum price markets allow is legitimate.
• Ideally, this should also be benchmarked at an ambitious
level and transparently, by reference to an independently
measured but relevant index (PPI, KPMG, LTO…)
• Ultimately: you have nothing to fear from MSAs, but you must
make sure you understand fully what signing or not signing
involves in your co-op.
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