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Australian Dairy Farmers worried as Murray Goulburn drives farm gate milk prices even lower.Lawyer speaks.

Murray Goulburn will cut the amount it pays for milk even lower over the next 12 months in a decision industry figures say will drive farmers to the wall.

The nation’s largest milk processor announced on Tuesday an opening price of $4.31 per kilogram for milk solids next season, starting July 1.

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Dairy industry figures say the new milk price is below the cost of production. Photo: Jessica Shapiro

That is even lower than when Murray Goulburn cut its price from $5.60 to between $4.75 and $5 in April, sending shockwaves through the industry.

The new $4.31 rate is after a 14¢ repayment is applied for loans Murray Goulburn gave farmers to see them through the final months of the 2016 financial year after April’s price cut.

Murray Goulburn said on Tuesday it expected its price to rise to $4.80 by the end of next season.

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Most farmers would have expected a higher opening price. Photo: Louie Douvis

David Basham, acting president of advocacy body Australian Dairy Farmers, said farmers would now endure an entire year of being paid less for their milk than the cost of producing it.

“This is going to be really tough for the Murray Goulburn farmers – it’s going to be below the cost of production for the majority of them,” Mr Basham said.

“We think that about $5 to $5.20 is about where cost of production is in the current environment and this is a good way below that.”

Mr Basham said most farmers would have expected a higher opening price, based on those announced by competitors. Warrnambool Cheese and Butter will open at $4.80 and Bega announced a $5 opening price last week.

United Dairyfarmers of Victoria president Adam Jenkins said many suppliers now faced hard choices about how to keep their businesses afloat.

“They were gutted by the first decision and now they’re numb at this decision,” Mr Jenkins said.

“They understand it’s good to have a conservative opening price moving forward, but they didn’t think it’d be this low.

“You can’t help but think that some of this low price is born by some poor management decisions right from the outset last year.”

Murray Goulburn’s interim chief executive David Mallinson said there was a global milk glut which continued to keep the global dairy price low.

“The milk price, in reality, is probably lower than what most people were hoping for but… it is a reflection of where the market is,” Mr Mallinson said.

“What we heard from suppliers is they wanted guidance on where the milk price was. They last thing they need is future step-downs.”

Mr Mallison said Murray Goulburn had set a lower opening and forecast milk price than its competitors because, as the market’s largest player, it had greater exposure to price shifts on the global market.

The producer was helping dairy suppliers through the price trough with support payments, and by waiving compulsory share acquisitions and extending interest free loans, Mr Mallison said.

Murray Goulburn forecast a net profit after tax of $42 million for 2017 in an update to the market on Tuesday, two-thirds of which will go to farmers under the cooperative’s profit-sharing deal.

Murray Goulburn’s major competitor Fonterra followed its shock April price cut, leading to widespread anger from both farmers and something of a consumer backlash against cheap, home brand milk.

The price cut also lead to a $11.4 million funding package from the Victorian government and the industry and a $555 million low-interest federal loan scheme to help farmers adjust.

WINE ONLINE-2

Henry Sapiecha

 

July 11th, 2016
Topic: DAIRY MILK, PRICES, VIDEOS AUDIOS Tags: , , ,

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