Thursday, March 28, 2024

Irish milk co-op to offer flexible loans to suppliers

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Irish dairy co-operative Glanbia has teamed up with the Ireland Strategic Investment Fund, Rabobank and Finance Ireland to announce plans for a €100 million (NZ$168m) MilkFlex Fund available to milk suppliers of Glanbia.
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The loans will be available to suppliers to draw down for investment in on-farm productive assets to support an existing or growing dairy farm enterprise and will have a standard term of eight years but under certain volatility can be extended by up to a further two years. The loans will be available in various sizes ranging between €25,000 and €300,000.

With an aim to provide farmers with cashflow relief when it is most needed the loan will have inbuilt "flex triggers" that move the repayment term in response to movements in Glanbia Ingredients Ireland's manufacturing milk price.

The repayment structure is flexible being determined by the time of year and the seasonal milk supply curve. Therefore, there will be no loan repayments during the low milk production months from November to February. Repayments will be automatically deducted from the supplier's milk cheque. 

Repayments will be reduced by 50% for six months when GII’s base price falls below 28c/l including VAT for more than three months, and suspended for six month when it goes under 26c/l including VAT for more than three months. When the price exceeds 34c/l including VAT for more than three months repayments will increase by 25% for the following six months.

The reduction in repayments can be triggered up to four times over the length of the loan, suspension of repayments can be triggered two times and an increase in repayments can be triggered up to four times over the period of the loan.

There is also consideration of the risk of a disease outbreak. In the case where a notifiable disease reduces milk volumes the loan repayments may be suspended for the following six months. 

The Irish Farmers Association National chairman Jer Bergin said the Glanbia MilkFlex Fund loan initiative, a European pilot scheme, was a welcome innovation marking a new departure in farm finance which would raise the bar for the farm finance offerings which will now be expected from all financial institutions.

“Our financial institutions must respond with equally well-priced and flexible financial packages for farmers in all sectors, including for short term and seasonal finance,” Bergin said.

IFA National Dairy Committee chairman Sean O’Leary added: “I believe this well-priced loan package, with its repayment flexibilities linked to specific milk price levels or disease outbreaks, will provide Glanbia suppliers with competitive finance. However, it must spark some serious rethinking by our conventional banks of the pricing and repayment structures of their own offering to all dairy farmers, regardless of which co-op they supply”.

“Also, while this scheme addresses the need for investment financing, it does not deal with the most pressing issue of the moment: the need for well-priced, flexible short-term cash options. This is an area where banks really need to step up to the mark,” he said.

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