Because without this expansion you could pay a higher price for the existing milk.
Think about a farm that has no borrowings. Able to take x amount out. He doubles his numbers he can't take 2x out until the investment is paid for on the expansion. And let's assume he is just as profitable per litre on the existing milk as the new milk. The new milk has a bank repayment to come off it.
At the moment all milk pays for this investment (new and existing).
You have economies of scale but I don't believe this is actually worth much when you have a company size of glanbia. And one problem with a big supply peak (due to spring calving) is when the peak processing months come they have to process it into every product they can make not the most profitable products. Which reduces the return to the farmer.
Charging for new milk will be a farmer decision.
Think about a farm that has no borrowings. Able to take x amount out. He doubles his numbers he can't take 2x out until the investment is paid for on the expansion. And let's assume he is just as profitable per litre on the existing milk as the new milk. The new milk has a bank repayment to come off it.
At the moment all milk pays for this investment (new and existing).
You have economies of scale but I don't believe this is actually worth much when you have a company size of glanbia. And one problem with a big supply peak (due to spring calving) is when the peak processing months come they have to process it into every product they can make not the most profitable products. Which reduces the return to the farmer.
Charging for new milk will be a farmer decision.