The document provides a comparison of milk supply agreements (MSAs) across several Irish dairy cooperatives, including the duration, notice periods, financial contributions required from farmers, volume restrictions, milk price commitments, exclusivity rules, and improvements made from farmer consultation. It notes that MSAs aim to provide stability for both farmers and cooperatives but that the agreements vary significantly between cooperatives in terms of price commitments, financial obligations, and flexibility. The document advises farmers to fully understand the implications of signing or not signing an MSA with their individual cooperative.

1. Milk Supply
Agreements (MSA)
Context and
comparison

2. 2
Context of MSAs
• End of quota regime leaves a vacuum re. volumes of milk
• EU Milk package (now part of CAP)
• Contracts recommended between private processors and
producers to empower producers, give them security of
tenure and rights to negotiate prices + conditions
• Recognition of co-op statutes as providing similar
guarantees
• Irish context
• Need for investment in capacity or other by co-ops
• Need of certainty on volumes
• Forecasting in some cases to ensure matching investment
pace
• Need to reassure customers of security of supplies

3. 3
IFA process re. consultation
• IFA has issued general recommendations for MSA
• Wherever members requested: briefing organised with co-ops
for relevant members of National Dairy Committee and follow
up with specific recommendations
• We do not/cannot substitute to co-op consultation process
• Already done in:
• Kerry
• Dairygold
• Glanbia
• Aurivo
• Lakeland
• To be done in:
• Arrabawn
• Wherever else our members request

4. Comparison of MSAs
July 2014
(Note, some MSAs still
in development)

5. 5
1 - Duration and notice?
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

6. 6
2 – Share up? How much?
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.

7. 7
3 – Other financial contributions?
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); 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
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

8. 8
4 –Volume restrictions? Forecasts?
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

9. 9
5 – Specific milk price commitment?
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 IDB PPI, but no clear formula yet
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

10. 10
6 –Exclusivity? (all milk to co-op – this is
standard co-op rule provision)
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

11. 11
7 –”Improvements” from consultation?
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;
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); 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

12. 12
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 (e.g. fixed price/margin contracts and seasonality
bonuses in GIIL)

13. 13
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.
• However, expecting a commitment from one’s co-op through
better efficiencies, joint investment/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.