Dairy industry in despair for huge supplier redistribution

Farmers are looking to move processors, thinking primarily of protecting their business as best as possible because farmgate milk prices are at between break-even or up to 80 cents a kilogram of milk solids less than break-even price.

Some believe Murray Goulburn — which has the lowest “weighted average price” of all processors at $4.31kg/MS (with the clawback) — is set to lose the most.

This weighted average is far from the price that many dairy farmers will be receiving in their pocket, with The Weekly Times seeing many income estimates where the opening price is less than $4 a kilogram of milk solids.
Gippsland consultant John Mulvany said morale was “pretty crap” especially for those with a “sub-$4.50kg/MS price”.

“People below $4.50 are really sitting back saying, how will I now balance my budget?

“In Gippsland, Western Victoria and probably Tasmania, you can chisel out a break-even budget between $4.40 and $4.80, but to try and chisel a break-even budget at $3.75 — the in-pocket price for all premium milk — it really reflects our (terrible) milk price.”
Mr Mulvany said there would be dairy farmers “definitely shifting companies”.
“I’ve noticed a definite change in the attitude of even the most loyal Murray Goulburn people since the opening milk price,” he said.

“They are really doubting the credibility of what they are being told and looking at their own business to protect it.”

A phone call from a young farmer to Mr Mulvany highlighted the thoughts of many farmers throughout Victoria.

He said the farmer would receive $4.45kg/MS with Fonterra and $4.02kg/MS with MG. This farmer was contemplating moving to preserve the cash within his business.

“I did point out though to that client to remember what that company did just 50 days ago,” he said.
The Weekly Times has spoken to many farmers who were considering switching from Murray Goulburn, but they will wait until receiving their milk cheque on July 15.

An MG spokesman said it was possible some suppliers might leave, but he was not aware of numbers.

“To date there has been negligible net loss of milk,” he said.
“We expect some milk loss to continue in the coming year with retirements and movements between processors. Some suppliers will increase their milk production.”

Fonterra Australian milk supply general manager Matt Watt said they had some “prearranged” new milk start on July 1.

“There’s some inquiries being made. We will evaluate whether that’s a need and work through that,” he said.