In the December half, it lost $31.9 million, a sharp reversal from the $9.3 million profit of a year ago.

Earnings were hit by a drop in revenues to $1.17 billion from $1.38 billion, as wholesale milk prices slumped and milk supplies fell as dairy farmers shifted to supplying other processors.

The half year figures followed the booking of heavy impairment charges for a pricing support package provided to troubled dairy farmers last year.

Last October, Murray Goulburn warned of a steep fall in its milk volumes as farmers switch to supplying rival processors or quit the industry following its decision earlier to slash farmgate prices paid for milk and effectively opened the door for farmers not to repay an earlier assistance package

At that time, it warned of a 20 per cent hit to volumes due to both a wet spring and also farmer defections.

In the event, the outcome was a 20.6 per cent fall in milk intake during the half, due to record rainfall in parts of Victoria in September which hampered crop production as well as aggressive competition as rivals sought to replace lost intake due to the poor weather, it said.

The Co-Operative also confirmed it is subject to investigations by both the corporate regulator ASIC, the Australian Securities Investments Commission over potential breaches of the Corporations Act as well as the competition regulator the ACCC, the Australian Competition and Consumer Commission over possible breaches of the Competition and Consumer Act.

The Co-Operative has been subject to criticism over its accounting treatment of the $183 million support package provided to farmers with a firm of forensic accountants raising detailed questions about the accounting treatment of the move.

There is also a class action afoot which the company is defending.

This story first appeared on the Sydney Morning Herald website.