Innovative loans set Irish dairy farmers up for growth

Flexible, industry-tailored lending

The MilkFlex2 loan scheme increases dairy industry confidence, shielding farmers from seasonal shifts and fluctuating milk prices. Investing in long-term infrastructure and sustainability projects is now a reality for Irish farmers.

Traditionally, dairy farmers in the Irish Republic have had difficulties accessing generic loans because of the industry’s susceptibility to milk price fluctuations. With the June rollout of the MilkFlex2 fund, now available to dairy co-operatives nationwide, smaller-sized farms can access credit for farm improvements more easily.

Backed by Rabobank and Finance Ireland, the fund builds on the success of its 2016 pilot scheme, which worked with members of Ireland’s largest dairy co-op, Glanbia. Today, all of Ireland’s 18,000 dairy farmers can apply for MilkFlex2 loans.

Poised for growth

The removal of milk quotas in 2015 resulted in a significant increase in milk production, which rose from 5.5 billion liters to more than 7 billion in 2017. Farmers can now increase production in response to demand, making the sector more economically viable in a global market. But to meet these new market demands, many farmers will need greater access to financial resources.

“With the removal of milk quotas, the Irish dairy industry is positioned to exploit Ireland’s natural benefits and increase its contribution to the Irish economy for the first time in 30 years,” says Kevin Bellamy, Global Sector Head Dairy at Rabobank. “Milkflex2 has been specifically designed to enable this to happen, easing the risk of on-farm investments and increasing the sector’s sustainability.”

“We hope it will inspire other financial institutions.”

- Catherine Lascurettes, Irish Farmer’s Association Dairy Committee

Demand for bespoke lending

Catherine Lascurettes, Executive Secretary of the Irish Farmer’s Association Dairy Committee, says: “It’s important from our perspective that as many farmers as possible have access to this scheme.” She continues: “The fund has established the idea that finance packages can be adapted to reflect the variability of dairy farmers’ income. We hope it will inspire other financial institutions.”

Bill Kane, chief executive of Finance Ireland says: “The national MilkFlex2 roll-out is a direct response to demand from co-ops across the country who saw how innovative and farmer-friendly the pilot scheme was.”

Flexible repayments

Using inbuilt ‘flex triggers,’ MilkFlex2 aims to provide cash flow relief when farmers need it most. For example, loan repayments can be put on hold in response to external events like a sharp fall in milk prices or disease outbreak. Crucially, the fund also matches famers’ repayment schedules to seasonal milk production cycles, decreasing payments during slower months and pausing them through the winter.

Annette Rowson, a dairy farmer in Wexford, south-east Ireland, obtained a loan in 2016 during the pilot phase. “The scheduling of repayments to come out at peak months really helps,” she says.

Rowson first used MilkFlex to improve her milking parlor. She plans to apply for further funds to improve the collection and recycling of water on her farm. “There will be substantial uptake because the loans are not secured against the farm, but are linked to production,” she predicts. “It’s innovative to have a product that is tailored to the sector.”

“It’s innovative to have a product that is tailored to the sector.”

- Annette Rowson, Dairy farmer

Investing beyond milk production

Farmers can borrow up to EUR 300,000 over eight years, enabling long-term investment stability. Furthermore, the scheme accepts loan applications for investments in new categories: not only for milk production, but also for sustainability improvements, like on-farm energy efficiency, renewables, and soil improvement. In other words, it eliminates financial barriers for dairy farmers wanting to invest in sustainable solutions for their farms and further contributes to Ireland’s climate change targets.

Keeping an eye of the success of MilkFlex2, Rabobank’s Global Client Solutions is now working on rolling out this model across other sectors and regions.