A €55m scheme to provide interest-free cash flow supports to dairy and grain farmers with Glanbia Co-op has been confirmed as part of a move to combat volatility.
Glanbia confirmed the advance payment scheme will offer farmers who are members of their co-op the chance to draw down the loans when the market prices for milk and grain fall below certain levels or ‘price triggers’ set by the board of the co-op.
The interest free repayments to the scheme will then follow when market prices move above certain levels.
The Glanbia Co-op moved this morning to notify the Irish Stock Exchange that it intended to raise €100m by issuing a five year exchangeable bond against Glanbia plc shares that it owns.
The majority of the funds will be used for the volatility tool and the remainder for other business interests.
The Glanbia Advance Payment (GAP) Scheme will run from May 2016 to December 2020.
Earlier this year Glanbia launched a €100M fund linked to the milk price for dairy farmers. The MilkFlex fund was designed to provide loans from €25,000 up to €300,000 to dairy giant Glanbia’s 4,800 milk suppliers, with key triggers that can adjust the repayment terms in times of low milk price.
The investment funds came from the partners Rabobank, the Ireland Strategic Investment Fund, Finance Ireland and €6m from Glanbia Co-operative Society.
Those MilkFlex loan repayments were to be automatically deducted from the suppliers’ milk cheques by Glanbia Ingredients Ireland.
It was also based on trigger which meant if the GII manufacturing milk price fell below 28 cent a litre including VAT for three consecutive months the repayments would be halved for the following six months. If it drops below 26 cents a litre for three consecutive months the repayments will be suspended for six months.
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