Mary Melican, Wangoom

On making inquiries of the Council about road closures for the cycling I was told that Cycling Victoria had permission to close the roads. Which roads ask I? We don’t know as they haven’t sent us a map. I then asked if they had permission to close whatever roads they want. They have our (WCC’s) permission to close roads? Which roads? This argument goes around for as many laps as the lycra loonies on Sunday.  Not a happy resident and ratepayer as it seems that the Council gave them blanket permission to close whatever roads they wished and for how ever long they wished. 

Christine Webb, Warrnambool

Having read Chris O’Keefe’s letter defending United Dairyfarmers of Victoria, I couldn’t help wondering what the young dairy farming couple featured on the front page (The Standard, May 14) must have felt in reading that letter. Not one word of sympathy regarding the circumstances which all dairy farmers are finding themselves in. The whole letter was about UDV. If the UDV, ADF, and Dairy Australia, and some processors were giving the leadership that should have been given, the industry would not be in this shocking position. Mr O’Keefe states the cause is the collapse of world markets, I suggest Mr O’Keefe, read  The Sunday Age (May 15) under the heading Why weren’t farmers told? To me it indicates not just collapsed world markets. Yes, the UDV was formed 40 years ago when two lobby groups came together, the leaders of saw a need for change, perhaps today’s so-called leaders need to read the signs that it is once again time for change. I don’t see two rival groups, I see two different generations, the older generation trying to stand firm, the younger appearing to want change. Mr O’Keefe’s invitation for everybody to join the UDV should not mean come along and sit in the corner and be quiet. I see Farmer Power full of enthusiasm, it would be a shame if the old tired ones stood in their way. It was pointed out to me the same few surnames seem to bob up in leadership roles of our industry. We need broader participation. Sadly at times like this, leaders tend to cling to their position and say “don’t blame us”. Much was said at the Terang meeting on May 11 about unity and disunity. Unity will follow good leadership, disunity is usually a sign of inadequate leadership. 500-700 people attending the meeting says  something is very wrong. Again, this should be about the plight of the farmers, not about the pecking order. Mr O’Keefe, I too am a member of the UDV. We should remember too, that good leadership is also about knowing when it’s time to step aside.​

John McConnell, Terang

Over the last two weeks there has been shock and anger expressed, followed by accusations at supplier meetings, in the press and other dairy industry forums. The reasons for which are well documented. It is time to put a stop to this negativity and move on. Like all Australian dairy farmers I was and am very disappointed as I have watched the events unfold so quickly and so late in the financial year. I question how the management and board could let it get to this state at such a late stage yet when I consider how MG have handled the aftermath, a number of positive points come to mind. MG have driven the Australian milk price;  if ever there is clear evidence that MG is the milk price setter, it is in how Fonterra Australia have dropped their price to match that of MG.

 As a relative newcomer to Australia, I think of Australians as having a culture of giving you a fair go and respecting someone for having a crack. Yet why is it everyone wants to take a shot at MG despite the fact they have driven the milk price for the benefit of all Australian dairy farmers?

Yes, they have made an almighty blunder and you have to question the level of accountability and governance; but if the co-op had not put such emphasis on one high margin product to deliver a $5.60/kg MS price (assuming that is the main reason for the profit downgrade and nothing else comes to light) and if the right reporting systems had been in place, then we should have been notified of this milk price drop earlier. In which case, we could have taken action to reduce capital spend or other unnecessary operational costs.

However, if the price had dropped to $4.75 - $5.00/ Kg MS in October or November a lot of dairy farmers would be no better off today. In fact, there is an argument that we are 47 – 72c a kilo better off with the funds in our bank accounts. We will have to pay it back over 3 years, but at least it has helped relieve the consequences of a dry spring and autumn.

Unlike Fonterra’s suppliers the debt sits on MG’s books and not ours, so our credit rating and bank facilities have not been affected. There is an argument that MG should have taken the loss, written it off against reserves and moved on. However, my understanding is that they could not. In simple terms, the essence of a co-op setting a milk price is that the co-op processes the milk and sells the products for the best monetary value. After deducting the costs to do so, what is left is available to pay out in milk price and in MG’s situation also as dividend. As a consequence, if the value of sales drop, then so must the milk price and dividend.

As the dividend has reduced then so must the milk price, otherwise the unit holders would have been disadvantaged relative to the farmers. Even if they had written the loss off against reserves, for the financial health of the co-op those reserves would need to be built back up though a reduced milk price in successive years. The net effect is the same. Is $4.75 to $5.00/ kg MS a poor milk price? Considering that the average Victorian dairy farmer breakeven milk price is approximately $5.40/ Kg MS based on the Dairy Farm Monitor 2014-15 results for Victoria; yes this is disastrous, especially when the added costs of a dry spring and autumn in 2015-16 are added on. Yet on a cash payment of $5.47/Kg MS, MG are essentially trying to help their suppliers weather the storm, as opposed to slashing it to recover the loss and leaving their suppliers to pick up the pieces. So how does the milk price compare to other dairy producers around the world? When compared to Fonterra NZ at NZ $3.90/kg MS (milk price excluding dividend) or approximately AUD $3.60, MG’s price is much better. This is an unfair comparison, as Fonterra have a much higher proportion of sales in commodity products, in particular milk powders which have been hit the hardest. However it does highlight that if MG were still primarily a commodity business, we would be more than $1/Kg MS worse off than the $4.75 - $5.00/Kg MS forecast.  

European prices are a significantly higher due to their massive domestic market, but even they are experiencing the effects of the global dairy downturn. The year on year price drop in March 2016 was 16.2% for the Netherlands, 14.5% for the UK and 24.5% for Ireland. So MG’s price sits somewhere between NZ’s and the EU’s, which in itself indicates that the ‘value add’ strategy is the right strategy as long as it delivers added margin, which it appears to be doing.

I hear that suppliers are leaving MG and that legal action is being taken against the co-op. I would refer you to a recent article written by Steve Spencer in which he points out that “in recent years MG has focused on improving performance in milk prices, forcing its competitors to match or better it. When the major farmer owned buyer of milk has been weakened, effective leverage at farm gate can’t be sustained”. Fonterra’s recent actions have reinforced this point.

Therefore, before you decide to leave, or consider taking legal action against MG, think twice, as you will ultimately be costing yourself in a reduced milk price.

When I stand back and look at what has happened I have been given a reality check. 

I expected a price drop next season although not to the level that it looks like it will be. I also did not expect it to happen this season based on the signals being given from MG. It does reinforce that we are not cushioned from what is going on in the rest of the dairy world.  However in my opinion they have made the best of a bad situation. They have tried to cushion the blow to their suppliers as much as possible.  So far all the indications are that the strategy is right. It’s time to stop the negativity against MG. It’s a waste of energy that is better focused and served on our own businesses. To quote Steve Spencer "we need to take stock, adapt and press on”

Harper Kilpatrick, UK