March 10, 2016

Glanbia Cooperative Society has partnered with the Ireland Strategic Investment Fund, Rabobank, and Finance Ireland to create the €100 million (US$110 million) Glanbia MilkFlex Fund, reports Business World.

Rabobank, the Ireland Strategic Investment Fund, Finance Ireland, and Glanbia Co-operative Society will be investors in the fund, however, Finance Ireland will also originate the loans and manage the running of the fund.

This fund, which is designed to protect Ireland’s farmers from the current volatility in the milk market, will be the first to offer Irish farmers access to capital through channels other than traditional lending. Under its framework, the fund will offer competitive, flexible loans to Glanbia’s milk suppliers, however, unlike other funds, the Glanbia MilkFlex Fund will include built in “flex triggers” that will adjust repayment requirements in conjunction with shifts in Glanbia’s milk price, according to Dairy Reporter.

AgriLand reports that if Glanbia’s milk price falls below 28 cents per liter for three consecutive months, both principal and interest payments will be adjusted downward by 50% for the next six months. This consideration can be activated a maximum of four times within the term of a loan. If Glanbia’s milk price falls below 26 cents per liter for three consecutive months, all repayments in full will be suspended for the following six months. This action can be used a maximum of two times during the term of a loan. And if there is an outbreak of a notifiable disease that affects a farmers output during the previous year, loan repayments will be suspended for the following six months. However, if Glanbia prices increase to exceed 34 cents per liter for three consecutive months, loan repayments will increase by 25% for the following six months – at a maximum of four time during the length of a loan.  

All loans will be unsecured and offered in amounts between €25,000 and €300,000 and have a standard term of eight years, but may have the option for a two year extension. Approvals will be based on a farmer’s business plan rather than the asset value of the farm.

At the official launch of the fund, Business World reports that EU Commissioner for Agriculture and Rural Development, Phil Hogan said “…This new model of funding for milk suppliers is an international first and will mitigate the investment risks for milk suppliers. The Glanbia MilkFlex Fund comes as a welcome addition to the Fixed Milk Price schemes offered by Glanbia. It will be a valuable tool in assisting dairy farmers to manage income volatility, which is particularly challenging for family farms across the EU. Using innovative financial instruments to help farm families across Europe is a key priority for me and the Glanbia MilkFlex Fund can serve as an important pilot project in the drive to roll out such instruments.”