FINAL UPDATE: 6.00pm
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South-west farmers have expressed mixed feelings following suspension of Murray Goulburn’s cash clawback and the lowering of the forecast farmgate milk price.
Woolsthorpe farmer Joe McLaren said the suspension of the Milk Supply Support Package (MSSP) – set to cost the family business upwards of $100,000 per year – would “put a few dollars in the back-pocket”.
Several farmers – who requested to not be named – said they felt as though MG was “giving in one hand and taking from another”.
United Dairyfarmers of Victoria president Adam Jenkins said confusion and concern would remain until the processor provided clarity on “where (it was) seeing the milk price” and “what (it would) do” with the MSSP at the end of the financial year.
“It’s a little contradictory to what we’re seeing,” he said.
“Yes, it’s wet and we’re all down on production but it will still be a good spring.
“There’s confusion with other company’s moving up the chain… (and farmers are) trying to be positive with a decreased forecast.
“The UDV will continue to work to build a resilient and competitive industry.”
Macarthur farmer Craig Dettling said it was hard to compare other processors with MG unless “you knew how they were performing”.
"MG are being conservative but they have to be,” he said. “It’s disappointing with the volume loss but that’s the game we’re in.”
MG supplier-director Lisa Dwyer said it was “critical” the community remember the co-operative was a “systemically important industry organisation” and needed to remain.
“Everyone I have spoken to – including competitors – recognise that as a fact,” she said. “We need to remember to keep one eye on the future, not just the short term.”
UPDATE: 4.12pm
The processing giant’s interim chief executive David Mallinson said the company was doing its best to mitigate the effects of poor weather conditions on its farmers.
“In the past four weeks we have seen continued rain cause pasture and crop damage, reflecting the milk intake,” he said.
“We’ve lost 10 per cent of last year’s milk and 10 per cent has been lost due to the weather.”
Mr Mallinson said it was acutely aware of farmers doing it tough, which is why the MSSP was suspended until the end of the financial year.
“We were looking at the best season in years,” he said.
“But now we’re looking at a huge impost due to the weather.
“We’re working to make the best outcome for farmers… and being totally transparent.”
Mr Mallinson said if the issue was purely based on supply and demand in a domestic market, the prices would increase.
“We have 50 per cent in exports and we have to look at this too,” he said.
Mr Mallinson said the company stood by its MSSP decision following the milk-price “correction” in April.
“We had two options,” he said. “Step down in May and June or pay what was promised and recover the differential.”
Mr Mallinson said the decision was made with the “right intentions”.
UPDATE: 1.51pm
South West Coast MP and dairy farmer Roma Britnell said the announcement proved Murray Goulburn was listening to its farmers.
“They’ve heard that farmers are doing it tough and have removed the MSSP to give money back to farmers,” she said.
“They’re doing what they can.”
Mrs Britnell said the co-operative was 100 per cent farmer controlled – a “philosophy we’ve all got to remember”.
“We must try to maintain as much control over the value chain as possible because losing it puts us at greater risk,” she said.
“Ultimately, the outlook is positive.”
UPDATE: 1.26pm
South-west dairy farmers are battling mixed feelings about Murray Goulburn’s announcement, according to United Dairyfarmers of Victoria.
In addition to the suspension of the retrospective price cuts – Milk Supply Support Package (MSSP) – the change to the forecast farmgate milk price has raised a lot of questions.
President Adam Jenkins said the industry accepted the need to move forward but also questioned the impact of the decision.
“The revised figures of $4.70kgMS from $4.88kgMS, needs to be clarified,” he said.
“The rest of the industry is showing signs of recovery and other global market returns are moving in the opposite direction.
“The fact that Fonterra New Zealand has raised its 2016/17 forecast farmgate milk price by 50c to $5.25kgMS, needs to be understood in relation to the Murray Goulburn product mix.”
Mr Jenkins said the UDV was also skeptical of the pre-payment options and the growth incentive plans also announced on Thursday.
“The pre-payment may help farmers… but we have to question whether these decisions are in the interests of suppliers,” he said.
“All suppliers, including new and contracted suppliers and those who have pre-paid their MSSP must be treated equitably.”
Mr Jenkins said the UDV was willing to work with industry and looked forward to hearing the detail of MG’s decision at the Annual General Meeting.
“Having competitive processors is paramount to the success of the Australian dairy industry.”
UPDATE: 1.06pm
Dairy lobby group Farmer Power said the move was another example of “smoke and mirrors” by the dairy giant.
Vice-president Alex Robertson said the news “wasn’t going down real well” with south-west farmers “smart enough” to see the truth.
”They’re trying to stop people leaving the company,” he said. “They think farmers are stupid.”
Mr Robertson said the market was lifting and there was “definitely a shortfall of milk” which “should see prices improve”.
“Instead they’re giving us excuses why they can’t improve,” he said. “And weather isn’t the only factor here.”
Mr Robertson said the group had warned the government and MG this would happen.
“It’s time for the government to step in,” he said. “If you’re going to be an agriculture minister, you need to start acting like one.”
UPDATE: 12.30pm
MG supplier-director Harper Kilpatrick said the positive news was in the cash price increase of 14c.
“However it is disappointing - due to milk loss - that the forecast has been reduced,” he said.
“This is of course dependent on commodity prices and exchange rate, so there could still be an upturn.”
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EARLIER:
Murray Goulburn has announced it will drop its controversial milk payment clawback until July 2017.
The suspension of what MG calls the Milk Supply Support Package (MSSP) is effective October 1, placing 14c per kilogram of milk solid (kgMS) back into farmers’ pockets and increasing the average-weighted available milk price to $4.60kgMS.
The announcement was made to suppliers via letter on Thursday morning.
The increase comes with a sour aftertaste as chief executive David Mallinson said the entire south-east of Australia was severely impacted by “extreme wet conditions” and “lower farmgate milk pricing”.
He said milk supply across the board had fallen by 10 per cent, placing further pressure on the dairy industry chain, resulting in a lower-than-expected closing milk price of $4.70kgMS which is down from a predicted $4.88kgMS.
He said MG would also offer an option to receive this increase as a farmgate milk price pre-payment from Thursday, December 1 “to assist with farmers’ cash flows”.
A $0.35kgMS “additional growth incentive payment” for butterfat and $0.70kgMS for protein was also announced as an option for assistance, available from November 1.
“While (the forecast) is a disappointing outcome, this revised forecast with no MSSP deduction still provides farmers with a higher net milk price than their current estimations,” Mr Mallinson said.
“Achieving (the predicted closing price) also remains subject to commodity prices and foreign exchange not deteriorating.”
He said MG recognised the “severe financial strain” on its suppliers and thanked them for their ongoing support.
More to come.