Kerry Co-op milk suppliers could be set for a significant milk price top-up, unless Kerry Group management can prove that Kerry and the west Cork co-ops are not comparable.

An independent arbitrator ruled last Friday that the west Cork co-op prices should be included when calculating the Kerry Group milk price. The arbitrator has asked both sides to sit down and negotiate with this ruling in mind.

Each side now has three weeks to go back to the arbitrator to question any ‘point of law’ details in the 95-page ruling.

The Kerry Co-op board met last Friday (6 September) and again on Tuesday this week to discuss findings and next steps.

The nine person ‘leading price’ sub committee of the board will now negotiate with Kerry management.

Price differential

Analysis of milk prices in the Irish Farmers Journal/KPMG annual milk price review suggests that for the four-year period from 2015 to 2018 inclusive there is approximately a 2c/litre difference in milk price between Kerry Group and the average of the west Cork co-ops.

This works out at around €100 per cow per year. For the average Kerry herd size of 70 cows that’s a €7,000 milk price top-up per farm per year, if the full difference was passed back to ensure Kerry Group pays the leading price. Some price top-ups have already been paid out.

Years dispute

For exactly how many years the milk price top-up is applicable is still uncertain. Farmers will argue it’s for the duration of the signed milk contract. Kerry Group is likely to start negotiations on the basis that the arbitrator ruling relates to one year, 2015 only. Kerry Co-op farmers will be hoping for the €7,000 bonus per herd for 10 years, or upwards of €200m in total milk price top-up.

Kerry Group will argue that the top-up will only be a fraction of this, some of which has already been paid or not applicable, and all will only apply for a much shorter time frame.

The Irish Farmers Journal understands the arbitrator did open the door for Kerry management to prove milk price differences between the west Cork co-ops and Kerry and subsequent milk price differences.

These issues are to be discussed in negotiations.

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