Mr. John O'Gorman:

The Senator's assessment of it is very close. I will describe how it works in practice. Initially, there was a desire by members, milk suppliers of co-operatives, to have some type of volatility management tool. The Senator will recall, and we are still in that market, that milk pricing is a very volatile business and can fluctuate hugely within a year, not to mind from year to year. Members who were in a post-quota era found themselves going to banks and the like to finance expansion at farm level. We are finding that these are the people who are most exposed. They came to the co-operatives and said they needed a price volatility mechanism or tool that could help them to work on this. The co-operatives went to their customers, be it Ornua or others, to see what price they could get from the market. Whatever volume of product we were able to get from our customers, either second or third party, was what we were able to bring back to our members.

We could offer a milk pool of X to our members, which is linked into an end product price, at price Y for a three-year period, a 12-month period or whatever. Most of them were three-year periods. That could come back at a price where members would say, "Absolutely not; that is not a price I would engage with", or they might say, "That is a price I would be happy with". Bear in mind that it is a variable price. The value of the constituents goes on that, so it is a base price and then one gets one's bonuses, constituents and so forth on top of that. Once the individual co-operative knows what volume it has to offer its members, it is then in a position to offer it.

Generally, what had happened was that the individual co-operative would indicate that there would be a maximum of 10% per supplier. Even if there was unused amounts left over, that would not be exceeded. However, some co-operatives may have facilitated members, as they would have seen it at the time, in exceeding that level. They are the people most heavily exposed now. It is a problem for-----