Suppliers say Murray Goulburn should brace for significant shortages as farmers continue to walk away from the co-op, or the industry all-together.
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Murray Goulburn – which will hold its annual general meeting in Melbourne on Friday – this week confirmed its forecast net profit after tax of $42 million for 2016-17 would now be lower because of a likely 20 per cent slump in milk receivals.
The milk intake slide was attributed to a wave of farmer retirements and suppliers swapping to other processors in the wake of MG’s massive late season price cut early this year and fallout relating to the decision.
“The biggest problem they’ve got is they’re not going to get that milk back,” said dairy farmer Chris White, who runs a 1100-head herd at Finley.
“There is going to be a huge shortage … the milk that is leaving the system won’t be replaced in a hurry because people have sold their cows or sent them to slaughter.”
The dairy co-op also cut its forecast seasonal farmgate milk price from $4.88 a kilogram of milk solids to $4.70kg while announcing a decision to suspend it’s unpopular Milk Supply Support Package for 12 months.
However, a 35c/kg “additional growth incentive payment” for butterfat and 70c/kg protein has been announced as an option for assistance, from November 1.
The co-op’s total southern region milk intake is expected to be 2.7 billion litres this financial year.
The big wet follows a severe dry period in southern NSW and Victoria in 2015.
MG’s net milk losses because of retirements and suppliers transferring to other processors alone represented a 350m litre cut on 2015-16 production.
Northern Victorian volumes fell almost 17 per cent in August compared with the same time in 2015.
“While a disappointing outcome, this revised forecast with no MSSP deduction still provides farmers with a higher net milk price than their current estimations,” Murray Goulburn’s acting chief executive David Mallinson said.
He said the company appreciated the “severe financial strain” on its suppliers and thanked them for ongoing support. But the clawback decision and incentive plan did little to ease growing farmer anger towards the company’s management.
“Nothing surprise me anymore from Murray Goulburn. If they think they’re in the shit now, wait until the 15th of July next year,” Mr Evans said.
“The only suppliers they’re going to keep are the people who can’t go anywhere else.
“There’s very little competition here in the North East and 95 per cent of us have to supply Murray Goulburn and don’t have a choice.”
Results of a broader review of the clawback program will be discussed at the AGM.