In its latest release to the Australian Securities Exchange, MG said it expected to receive about 2.3 billion litres in 2017-2018, without any significant changes from seasonal impacts.

The big drop in milk supply from the 3.5 billion litres MG received in 2016-2017 reflects a big movement by dairy farmers in search of better prices away from MG to other processors.

MG also decided last year on a phased closure of three of its processing plants, at Kiewa and Rochester in northern Victoria and another in Tasmania, because of the falling milk supply and to cut costs. 

The big dairy cooperative’s factory plant at Koroit continues to operate.

MG today said the reduction in milk intake would not affect the opening average farmgate milk price of $5.20 a kilogram milk solids (kgms) that it was offering farmers.

It said the impact of the drop in its milk supply had been offset by various cost and business improvements.

But it warned its forecast full year milk price range of $5.20-$5.50 kgms could be under threat if the recent strengthening of the Australian dollar continued over the full financial year.

“This could create some uncertainty in relation to the achievability of $5.50/kg MS,” MG said.

“MG will continue to consider all avenues to maximise the available farmgate milk price.

“MG will provide a further business update at the time of the release of the 2016-2017 full year results announcement on August 22, 2017, or earlier as required,” it said.

MG also announced it had entered into an agreement to sell certain assets from the Kiewa plant it has closed and the Kiewa Country brand to a business in the Kiewa area.

It said the business was expected to recommence local manufacture of dairy products in the future and the commercial terms of the transaction were confidential.

MG also said it had appointed Deutsche Bank AG as financial adviser to MG for the previously announced comprehensive strategic review of the dairy cooperative.