Murray Goulburn announced an opening milk price for the 2016-17 season of $4.31 a kilogram of milk solids (kg/ms).
It was the processors second price cut in two months.
Victorian dairy farmer Paul Mumford, from Gippsland, said the price was well below the cost of production and many farmers would be unable to cope.
«You have to assume that some people cannot sustain these drastic low prices and they will take the option to close their doors on their business,» he said.
A Riverina farmer from southern NSW said he was left «scratching his head» when the price came out.
Malcolm Holm, from Finley, milks 460 of his 650 herd and had budgeted on a $4.75 milk price based on Bega offering $5kg/ms and Warrnambool Cheese and Butter $4.80kg/ms.
«It leaves us going back to our budgeting and looking at our costs where we can prune some more costs.»
Mr Holm has already reduced stock numbers and is considering further cuts.
Accessing federal loans
Farmers have so far been unable to access the federal concessional loans, because they need to show their cash flow.
It’s only now that the processors have announced their new prices that farmers can budget for 2016/17.
Gippsland farmer Marian McDonald, is awaiting Fonterra’s opening price.
She said in previous attempts to access drought concessional loans she had trouble proving she was a real farmer.
«They said at the start that I was earning too much money to be a real farmer,» Mrs McDonald said.
«After proving I was a real farmer, the next thing was they said I was not viable and that I needed to be able to pay off the loan in 15 years and show a 8 per cent return on investment, which is a farcical thing to require of a dairy farmer.
«If there’s one thing for sure, if you’re in dairy farming you’ll always have debt.»
Australian Dairy Farmers acting president David Basham said the most severely affected farmers were Murray Goulburn and Fonterra suppliers.
But he said he was frustrated with the wait for eligibility criteria to access the federal loans.
«We have the criteria now in Victoria and Tasmania, but not in South Australia,» Mr Basham said.
«They have to be MG and Fonterra suppliers, have to have equity they can borrow against or be able to transfer existing loans.
«It doesn’t exclude share farmers but they have to be able to meet the assets test, and they can talk to Rural Financial Counsellors.»
Bank defends dairy outlook
ANZ was one of the banks to hype up the outlook for dairy, as recently as October 2015, with the ANZ report «Sign of the Times» pointing to strong long term demand in Asia, and need to grow from 9 billion litres to 15 billion litres a year.
ANZ encouraged farmers to consider expansion, with potentially risky investments, like intensive feeding in barns.
Mark Bennett, the head of agribusiness with ANZ, defended the strategy.
«It’s all part of looking at the industry dimensions, what are the things that could produce more milk,» he said.
«It was a challenge to the traditional system to produce more milk in Australia, to create more diversity in the way we produce milk in Australia.»
Mr Bennett said confidence had been hit in the short term, but more intensive dairying could be part of the industry in time.
Rabobank analyst Michael Harvey said the medium term outlook for dairy remains strong, as production falls, the prices will return to positive territory.
Source: ABC
http://www.abc.net.au/news/2016-06-29/milk-price-fall-out/7553988
