Kerry Dairy Ireland (KDI) has defended the new milk supply contract issued to farmers, amid criticism from some suppliers.

The business said it "remains focused on delivering a competitive milk price", as the business experiences push back on the contract from the Munster Dairy Producer Organisation (MDPO), a producer organisation formed by suppliers of milk to KDI.

The MDPO has criticised the contract offered by the processor, and called on farmers not to sign it.

The new contract was revealed to suppliers in April.

It replaces the previous contract, which expired on April 30.

In a statement to Agriland, KDI said that the contract issued to farmers is "final and balanced", stating that it comes with a deadline of August 4 for completion by the supplier.

"The purpose of the contract is to put in place a clear long-term framework between the business and our milk suppliers, providing certainty, continuity and security for the years ahead," KDI said.

The statement added: "We fully respect, and expect, that farmers will want to scrutinise the contract carefully before signing, and the business is committed to answering supplier queries properly and directly."

According to the business, its focus has been on "making sure the long-term arrangements are understood", and that suppliers "see this business as one that is committed to backing them for the years ahead".

KDI said it is "actively engaging" with suppliers throughout the process, adding that one-to-one "clinics" have been held across its branch network.

"As a majority farmer-owned business, farmer interests are central to the future direction of KDI. This business remains focused on delivering a competitive milk price, maintaining a secure outlet for suppliers’ milk and investing for the long-term strength of dairy farming across the region," the statement said.

KDI said it is committed to "investing heavily in the business over the coming years".

"The contract being put to our suppliers is part of building a strong, sustainable and farmer-focused business for the future," the processor added.

Meeting

Last night (Thursday, May 7), up to 100 KDI milk suppliers attended a meeting organised by the MDPO in the South Court Hotel in Limerick to discuss the new Kerry Dairy Ireland milk contract.

James Doyle, chairperson of the MDPO, said the meeting, which was also addressed by barrister Ciaran Dolan, had been called as "people are very worried about their future".

Doyle claimed the contract is a “one-sided document”, and he asked if anyone could show him something in the contract for milk suppliers other than having their milk being collected.

The meeting heard that MDPO had written to KDI chief executive Pat Murphy seeking to negotiate on the new contract.

"In my view, there’s plenty time to enter into negotiations on this contract between now and August 4," Doyle said.

Doyle reiterated the MDPO view that the contract should not be signed by suppliers.

Kerry Co-op board member Martin Crowe told the meeting that the co-op board had gone through the contract "a couple of times" with James O’Connell, KDI's director of agribusiness and sustainability, at board level, before the document was finalised.

Crowe, who had been involved with MDPO prior to being elected to the Kerry Co-op board, added "there was a certain amount of negotiation".

Crowe said that KDI is run by a board of 13 directors, 7 of which are farmers whom he said were democratically elected through the Kerry Co-op structure.

He said that Kerry Creameries Limited, which purchases the milk from suppliers, is wholly owned by KDI.

“It is controlled by farmers ultimately now which it hasn’t been heretofore,” he added.

MDPO concerns

Late last month, the MDPO outlined its objections to certain aspects of the contract.

The group had said that KDI will "have to fundamentally amend the contract to make it fair and acceptable to farmers".

The new contract states that the milk supplier may terminate the agreement without cause by giving no less than 12 months notice, such notice to expire no earlier than December 1, 2030.

This effectively gives the contract a duration of four years and seven months, from April 30 this year to December 1, 2030, with the MDPO claiming that the "capacity" of KDI to pay a competitive milk price for the duration of that period "is far from certain".

Doyle said the contract should be "for a considerably shorter period".

Another aspect of the contract the MDPO criticised is the milk grading standards.

The contract states that Kerry Creameries, which purchases the milk processed by KDI, can vary and amend its Milk Grading Scheme from time to time with 30 days notice to suppliers.

The MDPO objected to what it claimed is "free rein" for the milk purchaser to "modify, change and increase the milk grading standards that may be required into the future".

Audit

The MDPO also criticised the proposed audit rules under the contract.

The contract states that Kerry Creameries or its authorised representatives will have the right on "reasonable notice" (or without notice in cases of "suspected non-compliance") to access the supplier's premises, equipment, livestock, records and production processes for the purpose of audits.

According to the contract, these audits, when carried out, will check for compliance with the contract itself and the Milk Grading Scheme; adherence to applicable laws and industry standards; and any records relating to milk testing, veterinary treatments, feed inputs, herd health and milk storage.

The MDPO criticised the scope of these audits in the contract, with James Doyle saying: "This is totally unwarranted and unacceptable in any milk supply agreement."

He called for KDI to enter into "meaningful and direct negotiations with milk suppliers to agree an acceptable and fair supply contract".

By Charles O'Donnell and Aisling O'Brien