FrieslandCampina and A-ware have signed a ten-year contract for the supply of raw milk by FrieslandCampina. The contract involves the purchase of the entire available remainder of the 1.2 billion kilos of raw milk that FrieslandCampina has been required to provide annually to eligible market players since the merger late in 2008. The raw milk is scheduled to be supplied somewhere between 1 December 2014 and 1 May 2015.
The independent Dutch Milk Foundation (DMF) is responsible for implementing some of the merger conditions set by the European Commission in 2008 prior to approving the merger between Friesland Foods and Campina. FrieslandCampina is required to provide a maximum of 1.2 billion kilos of Dutch raw milk available to producers of fresh dairy products and/or naturally matured cheese at the FrieslandCampina guaranteed price minus 1 percent. The reduction by 1 percent will cease to apply on 1 July 2014.
The business units that were required to be divested to gain merger approval and now form part of Arla Foods and Deltamilk avail themselves of this option; 0.9 billion kilos of milk is reserved for them via the DMF. The remainder was available to other eligible players and A-ware has now claimed it.
The milk that is available at the DMF is reduced by the volume of milk of Dutch member farmers who have left FrieslandCampina using the exit scheme under which they received EUR 5.00 per 100 kilos of milk.
Implications for exit scheme
Now that A-ware has agreed to purchase the remaining milk volume, the third-party milk availability ceiling of 1.2 billion kilos of milk has been reached. Member farmers of FrieslandCampina in the Netherlands can still terminate their membership at any time under the normal procedure using the departure scheme if they migrate to Deltamilk. The volumes they take with them are deducted from the volumes available to Deltamilk.
A different situation applies to member farmers who wish to migrate to other players. This is due to the supplies to A-ware under the new contract. If, for instance, these deliveries start on 1 December 2014, the volume for the contract year from 1 December 2014 to 1 December 2015 will be fixed six months prior to this period, i.e. on 1 June 2014. This has the following implications:
- applications submitted before 1 June 2014: migration after a minimum of three calendar months in accordance with the normal procedure under the exit scheme;
- applications submitted between 1 June 2014 and before 1 June 2015: migration on 1 December 2015 or later. The volume applied for in the period from 1 June 2014 and 1 June 2015 will be deducted from the volume available to A-ware during the contract year from 1 December 2015 to 1 December 2016.
This is a recurring cycle during the ten-year contract period.