Barry Irvin, chairman of rival Bega Cheese company, yesterday called on Murray Goulburn to reverse its decision to slash the average milk price it pays its 2600 farmers from $5.60 a kilogram of milk solids (42c a litre for milk) to below $5 a kilogram (35c a litre) for the 2015-16 year, backdated to payments made since last July.
Mr Irvin said such a massive price cut was unprecedented other than during the global financial crisis, unfair and morally questionable. He also accused Murray Goulburn of asking its farmers to “pay for the management mistakes of the business”.
Bega Cheese and other major milk processing companies such as Parmalat and Warrnambool Cheese and Butter have both guaranteed farmers that provide them daily with milk that they will hold the $5.60/kg price until the end of the annual milk season next month.
The price cut, mirrored by second largest processor Fonterra, claws back income already paid to dairy farmers for 10 months of milk supply, leaving them each with an average “overpayment” debt of $128,000 that must be paid back to the milk companies.
“It might be legal in some tiny print on a bit of paper but it is not fair and not right,” Mr Irvin said.
“I’ve been silent for a month but frustration and the unfairness of what they have done to farmers ended up getting too much for me to stand by and watch — and I am speaking more as a farmer here than Bega’s chairman.
“The issue for me is that Murray Goulburn didn’t manage their risks, deliberately took value out of domestic markets by offering Coles too low prices and now they can’t make the sums add up are asking dairy farmers to wear all the pain.”
Mr Irvin, who acknowledged Bega had lost a recent Coles cheese contract to Murray Goulburn, said he has also been infuriated to watch the once mighty farmer-owned co-operative try to blame all its losses on low global dairy commodity prices.
He said low world prices were hurting every dairy company, but that it didn’t mean it was fair to drop the milk price below the cost of production and without warning to farmers in late April.
“The level of fairness is something I really struggle with,’’ he said.
Murray Goulburn said its farmers would have to pay back too-high milk prices so the company could recoup $200 million of accrued losses.
It also intends to still declare a corporate profit of $40m, with dividends paid to investors in the newly listed, partially floated Murray Goulburn Unit Trust
Other companies have made a judgment to wear the loss themselves and hold prices steady until the new financial year and next round of milk prices starts in July.
Source: TheAustralian