This comes as Murray Goulburn has been hit with the first of what is expected to be a wave of legal action.
Fonterra chief executive Theo Spierings yesterday sent the message as he explained to NZ suppliers why the company had cut Australian farm returns from $5.60/kg to $5/kg.
“What we are doing is drive (sic) every cent of money which we can out of Australia back to New Zealand shareholders in this extremely low milk price environment,” he said.
“That is what we are doing everyday. And Australian business this year will be at a plus.”
His comments cap three weeks of chaos and growing anger among Australian dairy farmers over the drastic price cuts by Murray Goulburn and Fonterra.
The United Dairyfarmers of Victoria is also investigating legal options to remove the farmgate milk price “clawback” from farmers and attempt to reverse the decision by milk processors — including MG and Fonterra — to slash prices.
The Weekly Times also understands farmers are investigating legal options against processors.
Group claim lawyer Adley Burstyner and Harwood Andrews are also investigating a possible class action on behalf of dairy farmers.
Fonterra yesterday defended Mr Spierings’ comments, saying the $5.60/kg paid to Australian farmers “did not reflect the reality of the market”.
“Nobody can stand by and continue to run a business at a loss,” the company said in a statement.
“It is unsustainable. Our shareholders who have invested their capital into the Australian business expect to see an appropriate return on their investment.
“They do not expect to be subsidising a loss-making business in Australia.”
In the past week:
THE MG unit price on the Australian Securities Exchange plummeted to 85 cents yesterday, down from its issue price of $2.10 last July.
THE Australian Securities and Investments Commission confirmed it will investigate Murray Goulburn.
THE Australian Competition and Consumer Commission launched an investigation of MG and Fonterra.
FARMER Power has proposed a dairy industry protest march in Melbourne next Wednesday.
NATIONAL Dairy Products cut its milk solids price from $5.90/kg to $5.18/kg for April, May and June.
FONTERRA altered its payment system eight days after it slashed May and June prices to $1.91/kg and confirmed it was taking money from the base price next season to top-up the milk cheques of autumn calvers in July and August.
DOMESTIC processor Lion has also cut the price for 24 of its 450 suppliers from $5.97/kg to $5.92/kg.
COLES will introduce milk to provide 20c a litre to the dairy industry to support Victoria, NSW and Tasmanian farmers.
KEY processors Warrnambool Cheese and Butter, Bega Cheese, and Australian Consolidated Milk continue to hold their prices for this season.
The Supreme Court writ against Murray Goulburn alleged misleading statements in MG’s product disclosure statement issued for the unit listing last July.
The class action was filed on behalf of lead plaintiff John Webster.
The Supreme Court action was filed against Murray Goulburn, plus 11 directors, including chairman Philip Tracy.
Also listed as a defendant was Duncan Morris, who resigned last week, but not Max Jelbart and Keira Grant, who tendered their resignations on May 3 and May 4, respectively.
MG yesterday said it will “strongly deny there is a proper basis for this claim, and will vigorously defend the proceedings”.
This comes as dairy farmers weigh up their options.
Warrnambool Cheese and Butter has been seeking farmers through Western Victoria and southeast South Australia to pick up supply.
It is understood farmers who shift to the Allansford processor must sign a supply contract for up to three years.
WCB refused to comment on the new milk it had picked up, but a well-placed industry source told The Weekly Times WCB has secured about 30-40 million litres of milk in recent weeks, mostly from Fonterra suppliers.
WCB is believed to have a waiting list of up to 100 million litres of milk, but many MG suppliers have opted not to change processors.
An MG spokeswoman said it had lost 14 suppliers out of 2600-plus, but was also taking inquiries from prospective suppliers.
Fonterra general manager Australian milk supply Matt Watt was unable to provide numbers around the amount of milk it has lost since its price cut on May 5, but admitted some supply loss.
Fonterra last week said it would take money from next season — starting July 1 — and provide it to farmers hardest hit by its recent cuts. Fonterra suppliers could be paid as little as $1.91/kg during May and June, with the additional $2.50/kg paid in July and August for milk supplied during May and June.
Gippsland dairy consultant John Mulvany labelled Fonterra’s second change to the price it was paying farmers “a joke”.
“The major processors of this industry have become a joke,” he said.
“It is now an embarrassment to be involved in the dairy industry with the corporate ridiculousness of Fonterra’s changing tides.”
Expectations of a flood of dairy cows being culled in Victoria are yet to eventuate.
HW Greenham & Sons’ Trevor Fleming said it was “business as usual” for the processor at Tongala.
Farmer Power will hold a meeting at Tongala tonight, following a meeting in Terang last week attended by about 500 farmers. These meetings are expected to build up to a protest rally in Melbourne next Wednesday.
Rabobank analyst Michael Harvey said the price cuts in the Australian dairy industry were a result of global markets and a rising Australian dollar.
“It is about the global market and potentially a communication issue in Murray Goulburn,” he said.
“The factories are facing a severe glut (of milk) on the market and it has finally caught up with us, despite their strategy of de-commoditising (products).”