Related: Further cuts in latest milk prices
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UPDATED: 3.30pm | Dairy farmers devastated
Dairy farmers have been left devastated after Murray Goulburn’s milk price announcement fell far from already-low expectations.
The industry giant’s unprecedented price cut will leave many farmers working without pay for years.
Woolsthorpe farmer Brian McLaren said he had never seen the price so low.
“I feel like I’m being screwed,” he said.
“I’m getting to the stage of retirement now and this just throws your life into turmoil.
“What am I supposed to do now?”
Mr McLaren said for three years he would be working for nothing, paying hundreds-of-thousands back to Murray Goulburn.
“I feel sorry for the young farmers who are new to the industry,” he said.
“The ones that are locked into leases and repayments on cows and land.
“This is going to ruin them.
“Everyone can walk away but when you’re invested so heavily, you can’t just throw your hands in the air.”
Mr McLaren said he and his family were outraged by the actions of Murray Goulburn’s former CEO who set the previous price too high for the global climate.
“He’s the one who stuffed up,” he said.
“If everyone ran a business the way he did, the whole country would be broke.
“And no one was game is enough to stand up and say, “this is not right”.
He said the government had lost their way with their assistance packages.
“All they needed to do was pick up the interest bill for land, cows and one tractor and suspend interest on loans for 12 months,” he said.
“Everyone would be able to get out of this slum.”
Mr McLaren said he would do all he could and just keep working.
“What pisses me off is I wont get paid for it,” he said.
“Everyone who is in the industry knows it’s hard work and I work hard but I want to get paid for it.
“I’m not even getting paid an hourly rate and no one else would stand for that.”
UPDATED 2.15pm | United Dairyfarmers Victoria: An industry left numb
The latest milk price just shows the “melting-pot of the dairy industry at the moment”, says Adam Jenkins.
The United Dairyfarmers Victoria president said many farmers were left feeling numb after they were told what their milk would be worth for the coming season.
“It’s a very volatile business,” Mr Jenkins said.
“We understand that the market is the market and that Murray Goulburn are being a lot more conservative this year,” he said.
“But for the UDV and for the industry it’s very disappointing.”
Mr Jenkins said many farmers would be operating well below the cost of production.
“The mean pricing on most farms is as low as $4.10 to $4.20/kms which is a low, low price,” he said.
“Some farmers are expecting 40 to 50 cents less per kilo than they’ve budgeted for.
“It’s certainly not a great start to the season.”
Mr Jenkins encouraged dairy farmers to take stock of their business to understand their cost of production and their break-even points.
“We are encouraging as many people to take up the help that’s out there,” he said.
“To control the things they can control and try to be as profitable on-land and possible.
“We’ll all need to pull together to get through the months ahead.”
Mr Jenkins said the UDV and Victorian Farmers Federation would continue to look at the best options for dairy farmers.
“Our concern is the health and wellbeing of our farming families and the service sector that provides support to the dairy community,” he said.
UPDATED: 1.15pm | Australian Dairy Famers president statement
Murray Goulburn’s opening milk price for the next financial year is well below the break-even point for many dairy farmers, says Australian Dairy Farmers president.
In a statement made on Tuesday, Mr David Basham said the financial implications of the decision would put farmers under financial pressure for years to come.
“Murray Goulburn’s announcement is not easily understood and does not provide the certainty that suppliers need to make sound business decisions,” he said.
The financial risk in the supply chain is being felt most by dairy farmers which is something that Mr Basham says should not continue.
“As an industry, we are going beyond short term measures to create stability for our industry’s long term future,” he said.
“Dairy industry leaders are united to provide farmers with the support they need during this challenging time and are working to deliver improved fairness and transparency throughout the supply chain.”
Mr Basham said despite the announcement, dairy farmers were resilient and would adapt their business as best they could.
“Dairy farmers know our industry is not immune to the global volatility at play,” he said.
UPDATED: 11.30am | The future for Murray Goulburn
Murray Goulburn promises:
- A series of information sessions about the outlook for the dairy industry and to meet with suppliers. Details to come.
- Cost reduction across the business.
- Cash flow increase through their new cheese ‘cut and wrap’ facility in Cobram and revised export distribution strategy.
- To offset the impact of the depressed commodity markets by pursuing opportunities in new markets, supply channels, food categories and in value add products.
EARLIER: Suppliers of Murray Goulburn can expect to receive $4.31 per kilogram of milk solid next season.
MG interim chief executive officer David Mallinson said the forecast price was $4.80kg/ms, however the opening price would include the controversial clawback announced earlier in May.
The price falls short of smaller competitors Bega Cheese and Warrnambool Cheese and Butter who held their farmgate price throughout 2015/16.
“The ($4.31 price includes) the application of the supply package repayment amount of $0.14 per kgms (one cent per litre),” Mr Mallinson said.
In a letter to dairy farmers, MG said it would support farm budgets and maximise cash flows by recouping half of the repayment in the opening price and the other half from future step-ups.
Australia’s largest dairy processor made the announcement on Tuesday morning, following an annual meeting last Thursday, June 23.
Mr Mallinson said their latest price reflected the poor global conditions in the dairy industry which were not expected to improve until the next calendar year.
He said that while Murray Goulburn acknowledged it would be a challenging year for suppliers, they hoped for improved conditions in 2017.
“Should more positive conditions emerge, MG will be vigilant in ensuring any upside passes to our suppliers and investors,” he said.
As “cat and mouse week” comes to a close, south-west dairy farmers await Fonterra’s response to the opening milk-price of MG.