Murray Goulburn fails to follow Fonterra’s NZ lead

THE United Dairyfarmers of Victoria has questioned why local dairy giant Murray Goulburn is slashing its farmgate milk price by 18 cents a kilogram of milk solids, while its rival Fonterra is raising prices in New Zealand. By PETER HUNT
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Last month Fonterra raised Kiwi farmers’ milk price by NZ50 cents to $NZ5.25kg/MS.
“The fact that Fonterra New Zealand has raised its 2016-17 forecast farmgate milk price by 50 cents to $5.25 per kg of milk solids, needs to be understood in relation to the Murray Goulburn product mix,” UDV president Adam Jenkins said.
Last month Fonterra raised Kiwi farmers’ milk price by NZ50 cents to $NZ5.25kg/MS.
“The fact that Fonterra New Zealand has raised its 2016-17 forecast farmgate milk price by 50 cents to $5.25 per kg of milk solids, needs to be understood in relation to the Murray Goulburn product mix,” UDV president Adam Jenkins said.
Last month Fonterra chairman John Wilson told New Zealand suppliers that since the co-operative last reviewed its forecast milk price in August, the global milk supply had declined and demand stabilised.
Mr Wilson told suppliers milk production in key dairying regions globally had declined in response to low milk prices, creating a more positive environment.
But Murray Goulburn’s ability to tap into any lift in global dairy prices has been severely constrained by a massive 20 per cent slump in its milk intake, as its farmers seek to supply other processors or are forced to abandon dairying.
Suppliers face a massive $183 million repayment on last season’s milk price, commonly referred to as a clawback, due to what most industry analysts have branded poor MG management.
Warning signs loomed as early as August last year that milk prices were tumbling when Fonterra New Zealand responded to the massive global milk glut by slashing its farmgate milk price.
On August 7 last year Fonterra NZ chairman John Wilson slashed his Kiwi farmers’ forecast milk price from $5.25kg/MS to $3.85kg/MS for 2015-16 “due to the continued significant imbalance in the global dairy market between weak demand and surplus supply”.
But in Australia MG’s management and board ignored the warning signs and kept reassuring local farmers they could look forward to a forecast price for 2015-16 of close to $6kg/MS.
MG was eventually forced to recognise reality in April this year, by which time it had overpaid farmers to the tune of $190 million.
Since then some farmers have opted to pay off about $7 million of the debt, while the remainder face making clawback payments for the next three years.
The clawback strategy has been a disaster, given MG suppliers do not carry the debt as individuals, but as a socialised debt on the milk pool. It means any supplier can opt out of repaying the debt by simply leaving MG for another processor.
This has meant that as suppliers leave, about 10 per cent so far, the volume left in MG’s milk pool has shrunk, leaving less milk to repay the debt.
Now wet seasonal conditions have exacerbated the situation, adding to MG’s woes and cutting milk production by a further 10 per cent.
MG’s interim chief executive David Mallinson has responded by suspending further repayments on the $183 million Milk Supply Support Package (clawback debt) until June 30 next year.
He has also announced MG would effectively reimburse suppliers for the 14 cents kg/MS they had already paid this season.
In the meantime, Mr Mallinson said MG was still reviewing the clawback, with recommendations to be put to suppliers at or before next Friday’s annual general meeting.
MG has also told the market it will not be able to meet its original $42 million profit forecast for the season and total milk intake is expected to be 2.7 billion litres.
MG’s decision to cut its forecast seasonal farmgate milk price from $4.88kg/MS to $4.70kg/MS appears to many farmers to be an act of giving with one hand and taking away with the other.
Murray Goulburn also announced that its forecast full year profit of $42 million would also be lowered, due to the decrease in milk intake and the wet seasonal conditions.
 
Source: WeeklyTimes
Link: http://www.weeklytimesnow.com.au/agribusiness/dairy/murray-goulburn-fails-to-follow-fonterras-nz-lead/news-story/f2178940c957fa61922793c343c2431f
 

Mirá También

Así lo expresó Domingo Possetto, secretario de la seccional Rafaela, quien además, afirmó que a los productores «habitualmente los ignoran los gobiernos». Además, reconoció la labor de los empresarios de las firmas locales y aseguró que están «esperanzados» con la negociación entre SanCor y Adecoagro.

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