Murray Goulburn (MG) still remains Australia’s largest dairy processor with good prospects of reversing the decline in its business, a dairy industry analyst says.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
There has been much talk about the impact the big drops in MG’s milk supply will have on the dairy cooperative’s business.
But Rabobank dairy industry analyst Michael Harvey said MG’s milk supply was still ahead of the two billion litres expected to be received this season by Fonterra, Australia’s second largest dairy processor.
MG’s milk supply is forecast to drop to 2.3 billion litres this season, down more than a third on the 3.5 billion litres it received about two years ago. The sharp drop in supply comes after many dairy farmers switched to other processors after MG slashed its farmgate milk prices last year.
But Mr Harvey said he believed the dairy industry “in general” wanted to see the cooperative turn around the decline.
“Most farmers want to see a strong cooperative,” he said.
Mr Harvey said he was heartened that MG realised it needed to go beyond the closure of three milk factories it announced earlier this year to improve its balance sheet.
He said MG was undertaking a comprehensive review of its business to address the decline.
“They are going right back to the drawing board to make sure they have got every part of the business right,” Mr Harvey said.
Among the elements of MG’s business being reviewed were its milk pricing system and its capital structure, he said.
Other factors on MG’s side were the upturn in global dairy markets that should help it pay higher milk prices to farmers, Mr Harvey said.
Good seasonal conditions in many dairy regions including the south-west should also help MG’s milk supply, he said.
However a challenge was the strengthening Australian dollar that would put pressure not only on MG but all Australian dairy exporters, Mr Harvey said.