The fund, which could launch as early as May 2016, will offer loans to Glanbia milk suppliers with loan repayments that can vary according to changes in milk price.
Glanbia says it is the first fund of its kind to offer Irish farmers access to finance through non-traditional lending structures. It is designed to help protect farm incomes from the impact of current dairy market volatility.
Linked to GII milk price
The fund will have inbuilt ‘flex triggers’ that can adjust repayment terms in line with movements in Glanbia Ingredients Ireland’s (GII) manufacturing milk price, which GII says will provide farmers with cash flow relief when needed.
Siobhan Talbot, Group Managing Director of Glanbia said the product was designed to match the cash flow generated by a dairy farm, with no repayments during times of low prices, and increased repayments at times of high prices.
Rabobank, the Ireland Strategic Investment Fund, Finance Ireland and Glanbia plan to invest in the fund, with Finance Ireland managing all aspects of the fund and loans.
‘Important pilot project’
Speaking at the launch, EU commissioner for Agriculture and Rural Development, Phil Hogan said, “It will be a valuable tool in assisting dairy farmers to manage income volatility, which is particularly challenging for family farms across the EU.
The Glanbia MilkFlex Fund can serve as an important pilot project in the drive to roll out such instruments.”
The loans will have a standard term of eight years, but may be extended by up to a maximum of a further two years when volatility triggers are enacted.
Workshops to provide information
Finance Ireland chairman Billy Kane said, “We are delighted to have a key role in managing what is a very innovative funding option for Glanbia’s suppliers and we would like to see this type of funding option extended to other suppliers in the future.”
Finance Ireland will host a series of workshops in the GII catchment area in April to provide information to milk suppliers interested in applying for the funding.
Features of the proposed loan product:
- Temporary reduction in loan repayments, when GII manufacturing milk price falls below $0.31 (€0.28) per liter for three consecutive months
- Moratorium on loan repayment when GII manufacturing milk price falls below $0.29 (€0.26) per liter for three consecutive months or when the outbreak of a notifiable disease reduces milk output materially on the previous year
- Increase in loan repayments when GII manufacturing price goes above $0.37 (€0.34) per liter for three consecutive months
- Repayments automatically deducted by GII from supplier’s milk receipts
- No loan repayments during low milk production months (November to February)
- Loans available for $27,400 (€25,000) to $329,000 (€300,000)
- Loans can be drawn down for investment in on-farm productive assets to support an existing or growing dairy enterprise
- Lending based on farmer’s business plan
- Amount set aside for new entrants to dairy farming
- Supplier must maintain valid GII Milk Supply Agreement for term of loan