There are serious discussions taking place in Ornua on who should sit on its board and whether it should move away from a co-op structure.
Details of individual views have not been made public and probably rightly so. However, the Irish Farmers Journal understands that the board will discuss a proposal next week that would see the existing cooperative structure converted to a plc.
Eoin Lowry goes into detail as to how an unlisted plc would be created, what impact it would have on the ownership structure and where dairy farmers would sit within it.
Despite being responsible for selling almost 50% of Irish dairy exports, most dairy farmers have little understanding of how Ornua operates and few appreciate the extent to which it influences milk prices from co-ops.
Many are unaware of the fact that by way of levies, dairy farmers have invested over €105m in the development of the business since it was created. While suspended in recent years, these levies were critical to the development of a business that, in 2018, had a net asset value of over €500m and was home to the €1bn Kerrygold brand.
According to Ornua, the success of the business within this branded space saw it return a milk price back to co-ops equivalent to 99% of the average global milk price (LTO).
As Jack Kennedy reported recently, the milk price returned to farmers in 2018 by Kerry, Glanbia and Dairygold was equivalent to just 94% of the global average. This gives a clear indication as to the critical role Ornua plays in adding value to Irish dairy exports – and in doing so shaping the milk price returned to farmers.
Despite the proposal being up for discussion next week, many co-ops have yet to discuss the issue
Given its strategic importance, Irish dairy farmers cannot allow themselves to be passive observers in any potential restructuring of Ornua. But unfortunately, this appears to be exactly where they are positioned at present with all discussion to date having taken place behind closed doors or within co-op board rooms.
As Jack Kennedy reports, despite the proposal being up for discussion at the Ornua board meeting next week, many of the co-op boards have yet to discuss the issue in detail and few have sought independent advice.
There is clearly a need for the IFA, ICOS and ICMSA – who each have a seat on the board of Ornua – to prepare a detailed position paper on the issue. It should inform farmers as to the value of a centralised marketing body, a governance structure fit for purpose and a how such a body should be structured to ensure it remains focused on continuing to create value for farmers.
The question also has to be asked as to whether the existing board of Ornua is best positioned to actually oversee any change to the co-op structure of the business. It is a board structure that most now accept to be completely dysfunctional. As we report, directors have been unable to execute even the most basic functions in recent times, effectively paralysed since last October when Glanbia announced it was entering the US market with its Truly Grass Fed brand – a move that was viewed as setting up in direct competition to Ornua’s Kerrygold brand.
It is worth noting that the proposal to move from a co-op structure to an unlisted plc only spawned out of the ongoing review into corporate governance within the organisation. It is a review that triggered the head of the governance review committee and now chair of Ornua to write to certain co-op CEOs and chairs in March asking them to step down from the organisation due to conflicts of interest. It is clearly not tenable now for the chair of Ornua to allow these conflicted board members have any input into shaping discussion on the future structure of the organisation.
At this point, the burning platform within Ornua is not the structure, rather it is the need to address the governance issues that have effectively paralysed the board. Any discussion around moving the business from a co-operative structure to a plc should only be explored after governance issues have been addressed and a functional, independent and non-conflicted board is in place to make key strategic decisions in the best interests of the business. If and when there is a need in the future to look at revising the structure of the organisation, farmers should be central to this discussion.
Beef: crisis talks end but crisis remains
While crisis talks between the meat industry and farm organisations concluded in the early hours of Wednesday morning, the reality is that for beef farmers, the income crisis remains. The commitment to carry out various reviews will not change the fact that a farmer selling cattle today (Thursday) is receiving €150 to €200 per head less than last year.
Also this week, we detail the various measures/reviews agreed as part of the discussions. Unfortunately, most amount to simply shuffling money between farmers.
Farmer attention now needs to focus back on the Government and on the European Commissioner for Agriculture Phil Hogan. Both parties must immediately and clearly outline to farmers what measures will be put in place to protect their income from what now looks like an inevitable no-deal Brexit.
Elsewhere this week, our global focus is an insight into the Philippines, one of the smaller Asian markets but one in which Ireland is well established.
Irish exports of dairy and pigmeat are strong across Asia though beef is some way behind. Chinese inspectors are expected to be in Ireland in the coming days and farmers and the wider industry anxiously await the outcome. Australia, New Zealand and the South American countries dominate the supply but such is the growth in demand that there appears room enough for everyone. Reports from Uruguay where the farmgate price is well ahead of Ireland bemoans the fact that they don’t have enough supply to meet demand.
China has the potential to quickly become Ireland’s second most important export market after the UK for beef and if the next round of inspections can get sheepmeat exports moving too, it would provide farmers with a glimmer of hope in what has been a very gloomy year.
Renewable energy: positivity welcome but practical steps still missing
The realisation that agriculture can play a key role in meeting Ireland’s renewable energy targets is nothing new. Year on year, we hear about harnessing the bioenergy potential of Irish farms but often little practical measures come to fruition. But the tide appears to be changing on this, albeit slowly. This was evident at this week’s Energy in Agriculture open day.
In 2019 alone, we saw the introduction of the long-awaited support scheme for renewable heat, which is expected to kickstart the bioenergy heat sector.
We’ve also seen money allocated to PV installation and a number of measures introduced to improve energy efficiency on farms.
While bioenergy production, whether electricity or heat, now has the potential to generate savings for farmers, there still seems to be a number of practical measures missing to generate a viable income stream on a farm-wide scale. This was clear from some farmers’ reactions during the open day. For example, solar PV is a no-brainer on Irish farms but farmers must be able to sell surplus electricity to the national grid.
With that said, there are plenty of measures which farmers could adopt to increase their farm’s energy efficiency. Heat recover units, pumps and LED lighting can all help reduce a farm’s electricity costs and help the environment in the process.
Sheep: confidence needed for breeding decisions
Sheep farmers are frustrated with how farmgate prices have been pulled in the last two weeks. Cuts of 20-30c/kg have knocked €5-€6 off finished lambs – but more importantly, they have brought prices under the €100 mark that many farmers see as the minimum they require to cover costs and at which they have any hope of generating a positive margin.
This is during a busy period for breeding sales and no doubt will have an effect on farmer confidence. As reported here, tighter supplies in spring reduced sheepmeat export volumes by 7%. The ewe flock fell by 80,000 head in 2018 and further drops will have irreparable consequences.
Now is the time for factories to show commitment to the sector.
There are serious discussions taking place in Ornua on who should sit on its board and whether it should move away from a co-op structure.
Details of individual views have not been made public and probably rightly so. However, the Irish Farmers Journal understands that the board will discuss a proposal next week that would see the existing cooperative structure converted to a plc.
Eoin Lowry goes into detail as to how an unlisted plc would be created, what impact it would have on the ownership structure and where dairy farmers would sit within it.
Despite being responsible for selling almost 50% of Irish dairy exports, most dairy farmers have little understanding of how Ornua operates and few appreciate the extent to which it influences milk prices from co-ops.
Many are unaware of the fact that by way of levies, dairy farmers have invested over €105m in the development of the business since it was created. While suspended in recent years, these levies were critical to the development of a business that, in 2018, had a net asset value of over €500m and was home to the €1bn Kerrygold brand.
According to Ornua, the success of the business within this branded space saw it return a milk price back to co-ops equivalent to 99% of the average global milk price (LTO).
As Jack Kennedy reported recently, the milk price returned to farmers in 2018 by Kerry, Glanbia and Dairygold was equivalent to just 94% of the global average. This gives a clear indication as to the critical role Ornua plays in adding value to Irish dairy exports – and in doing so shaping the milk price returned to farmers.
Despite the proposal being up for discussion next week, many co-ops have yet to discuss the issue
Given its strategic importance, Irish dairy farmers cannot allow themselves to be passive observers in any potential restructuring of Ornua. But unfortunately, this appears to be exactly where they are positioned at present with all discussion to date having taken place behind closed doors or within co-op board rooms.
As Jack Kennedy reports, despite the proposal being up for discussion at the Ornua board meeting next week, many of the co-op boards have yet to discuss the issue in detail and few have sought independent advice.
There is clearly a need for the IFA, ICOS and ICMSA – who each have a seat on the board of Ornua – to prepare a detailed position paper on the issue. It should inform farmers as to the value of a centralised marketing body, a governance structure fit for purpose and a how such a body should be structured to ensure it remains focused on continuing to create value for farmers.
The question also has to be asked as to whether the existing board of Ornua is best positioned to actually oversee any change to the co-op structure of the business. It is a board structure that most now accept to be completely dysfunctional. As we report, directors have been unable to execute even the most basic functions in recent times, effectively paralysed since last October when Glanbia announced it was entering the US market with its Truly Grass Fed brand – a move that was viewed as setting up in direct competition to Ornua’s Kerrygold brand.
It is worth noting that the proposal to move from a co-op structure to an unlisted plc only spawned out of the ongoing review into corporate governance within the organisation. It is a review that triggered the head of the governance review committee and now chair of Ornua to write to certain co-op CEOs and chairs in March asking them to step down from the organisation due to conflicts of interest. It is clearly not tenable now for the chair of Ornua to allow these conflicted board members have any input into shaping discussion on the future structure of the organisation.
At this point, the burning platform within Ornua is not the structure, rather it is the need to address the governance issues that have effectively paralysed the board. Any discussion around moving the business from a co-operative structure to a plc should only be explored after governance issues have been addressed and a functional, independent and non-conflicted board is in place to make key strategic decisions in the best interests of the business. If and when there is a need in the future to look at revising the structure of the organisation, farmers should be central to this discussion.
Beef: crisis talks end but crisis remains
While crisis talks between the meat industry and farm organisations concluded in the early hours of Wednesday morning, the reality is that for beef farmers, the income crisis remains. The commitment to carry out various reviews will not change the fact that a farmer selling cattle today (Thursday) is receiving €150 to €200 per head less than last year.
Also this week, we detail the various measures/reviews agreed as part of the discussions. Unfortunately, most amount to simply shuffling money between farmers.
Farmer attention now needs to focus back on the Government and on the European Commissioner for Agriculture Phil Hogan. Both parties must immediately and clearly outline to farmers what measures will be put in place to protect their income from what now looks like an inevitable no-deal Brexit.
Elsewhere this week, our global focus is an insight into the Philippines, one of the smaller Asian markets but one in which Ireland is well established.
Irish exports of dairy and pigmeat are strong across Asia though beef is some way behind. Chinese inspectors are expected to be in Ireland in the coming days and farmers and the wider industry anxiously await the outcome. Australia, New Zealand and the South American countries dominate the supply but such is the growth in demand that there appears room enough for everyone. Reports from Uruguay where the farmgate price is well ahead of Ireland bemoans the fact that they don’t have enough supply to meet demand.
China has the potential to quickly become Ireland’s second most important export market after the UK for beef and if the next round of inspections can get sheepmeat exports moving too, it would provide farmers with a glimmer of hope in what has been a very gloomy year.
Renewable energy: positivity welcome but practical steps still missing
The realisation that agriculture can play a key role in meeting Ireland’s renewable energy targets is nothing new. Year on year, we hear about harnessing the bioenergy potential of Irish farms but often little practical measures come to fruition. But the tide appears to be changing on this, albeit slowly. This was evident at this week’s Energy in Agriculture open day.
In 2019 alone, we saw the introduction of the long-awaited support scheme for renewable heat, which is expected to kickstart the bioenergy heat sector.
We’ve also seen money allocated to PV installation and a number of measures introduced to improve energy efficiency on farms.
While bioenergy production, whether electricity or heat, now has the potential to generate savings for farmers, there still seems to be a number of practical measures missing to generate a viable income stream on a farm-wide scale. This was clear from some farmers’ reactions during the open day. For example, solar PV is a no-brainer on Irish farms but farmers must be able to sell surplus electricity to the national grid.
With that said, there are plenty of measures which farmers could adopt to increase their farm’s energy efficiency. Heat recover units, pumps and LED lighting can all help reduce a farm’s electricity costs and help the environment in the process.
Sheep: confidence needed for breeding decisions
Sheep farmers are frustrated with how farmgate prices have been pulled in the last two weeks. Cuts of 20-30c/kg have knocked €5-€6 off finished lambs – but more importantly, they have brought prices under the €100 mark that many farmers see as the minimum they require to cover costs and at which they have any hope of generating a positive margin.
This is during a busy period for breeding sales and no doubt will have an effect on farmer confidence. As reported here, tighter supplies in spring reduced sheepmeat export volumes by 7%. The ewe flock fell by 80,000 head in 2018 and further drops will have irreparable consequences.
Now is the time for factories to show commitment to the sector.
This is a subscriber-only article
SHARING OPTIONS: