In an interview with The Standard, interim chief executive David Mallinson said the cooperative was in a good position to move on from what had been a “volatile” year. 

“People say we’re struggling. That’s not the case,” he said. 

Mr Mallinson acknowledged that it would take time to rebuild farmer confidence but said he was passionate about maintaining a strong MG and urged farmers to support the cooperative. 

“No one thinks last year was right,” he said. “We’ve just got to make sure it doesn’t happen again … it’s about being open with our farmers and delivering on promises.”

In a visit to Warrnambool on Friday, Mr Mallinson replied to a series of questions regarding the Milk Supply Support Package (MSSP), milk supply shortage and the future of the company. 

What is the financial state of the company?

We will process approximately 2.8 billion litres this year which is down from 3.5 billion litres last year  Although we have lost milk supply I think we are well on the road to recovery now. We have stability and we’re getting our cost-base right. The market strategy is going well.

What is the future strategy of the company with less milk supply?

We are 20 per cent down on milk. Ten per cent has left us to supply other processors and the other 10 per cent is climactic impact due to very wet weather in the first part of the season which affected all supply in Australia and increased competition between processors.

We have lost approximately 350 million litres of milk supply, mainly to Fonterra and Saputo. We make no excuses for that but conditions are good and we might yet see a better season than predicted.

We are still a leading competitor in the western district and the same size as Saputo. We have to reduce our operational cost to match the milk supply.

What’s happening with the MSSP?

The MSSP was put in place when we realised we could not pay the $5.60. The actual price we should have paid relative to market conditions was $4.80 but we were able to pay our suppliers $5.54 due to the MSSP.

The difference was funded by our balance sheet, to be recovered in future years. The MSSP was put in place for all the right reasons. Dropping the price in May and June would have been too severe.

What we have done since: We put a cap on what was owed so farmers will not contribute any more than what they were overpaid last year. Payments have been suspended until the end of this fiscal year due to the tough climactic conditions and we have extended the recovery period from three to six years. More importantly, the cost savings we’ve put in place will help make up for losses. Annual recoupment of the MSSP has been reduced to I cent/litre from 1 July 2017.

Is a lowered milk supply the cause for doubt in the Koroit factory expansion?​

That’s certainly not the case. The dryers required for our planned nutritionals investment aren’t big and only use 45 per cent skim, estimated to be 16,000 tonne of skim milk. We’re putting 50 to 60,000 tonne through Koroit already. Koroit remains a critical centre for our operations now and in the future. The location of the Nutritionals investment will not impact our current activities or workforce.