Kerry Dairy Ireland has confirmed that payments are currently being made to milk suppliers under the "Milk Supply Agreement Fund".

The €50 million fund was offered by Kerry Group to resolve the outstanding leading milk price dispute which has been subject of long-running arbitration.

The fund was subject to the acceptance of a deal which involved Kerry Co-op buying Kerry Group’s dairy business, Kerry Dairy Ireland, for €500 million.

During a series of information meetings, Kerry Co-op told suppliers that the fund would involve a cumulative payment of 5.4c/L to suppliers for the years from 2015 to 2020, as per their milk supply contract.

In December, the Kerry Dairy Ireland deal secured the back of shareholders, with the first phase of the agreement completed by the end of the month.

Under the terms of the sale Kerry Co-op initially has a 70% stake in Kerry Dairy Ireland (€350 million), with Kerry Group retaining a 30% interest.

The remaining portion of Kerry Dairy Ireland will have to be transferred to Kerry Co-op by 2035.

However, a group of Kerry suppliers have raised concerns about the payments which are now being issued to farmers.

The Munster Dairy Producer Organisation (MDPO) claimed that when shareholders voted on the joint venture agreement they "clearly understood" that the €50 million fund was exclusive of VAT.

James Doyle, the chairperson of MDPO, said that if the fund includes VAT, "it means that the payment made by Kerry plc for the leading milk price compromise is just €47.57 million".

"This would be totally unacceptable to dairy farmers," he said.

"Many farmers who had expanded their milk output over the last decade are very disappointed that the actual payment from the compromise fund that they have received in the last few days can be as low as 2c/L, and nowhere near the 5.4c/L that was emphasised during the lead up to the vote on the joint venture last December," Doyle added.

A spokesperson for Kerry Dairy Ireland told Agriland: "The total value of the Milk Supply Agreement Fund currently being distributed to milk suppliers is €50 million (VAT inclusive), the fund is allocated in full and in accordance with the milk supply contract."