Dairy processor Murray Goulburn lifts milk prices days after cutting its forecasts

Diary giant Murray Goulburn will extend its controversial claw back loan program and lift farmer milk prices. By Brett Worthington
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Just days after cutting its forecasted farmer payments, the processor announced two price step ups on the eve of its annual meeting.
The announcement came hours before rival processor Fonterra announced it would also increase farmer milk prices.
Murray Goulburn chairman Philip Tracy, in a statement, said Murray Goulburn would accrue extra debt to fund the $50 million needed to lift milk prices.
He said after reviewing the so-called milk supply support package (MSSP), the loan program would be suspended until the next financial year.
The three-year MSSP was designed to allow farmers to repay debts they owed the company after it suddenly and retrospectively cut prices in April.
Mr Tracy today said the program would be extended for an extra three years, taking it through until June 2022.
The company will immediately lift milk prices 13 cents a kilo of milk solids (kgms).
Farmers will then receive an extra 13c on June 30, 2017 «to reward continuity of supply», the company said in a statement.
Last week, it blamed wet weather and a dramatic fall in milk supply for forcing the company to cut its forecasted prices and profit.
Within a week, MG’s forecasted closing milk price has changed from $4.88kgms, to $4.70kgms and now $4.95kgms.
Farmers say they need an average milk price of $5kgms to meet their production costs.
Review of claw back loan program
The company held a review into the MSSP after it became clear it was not producing the intended results.
As farmers left the co-op, it meant suppliers that remained were facing the burden of having to pay back even more money to MG.
But that will no longer be the case.
Mr Tracy said the company would accrue an extra $30 million in debt to cover the shortfall left by farmers leaving MG.
«The annual MSSP recoupment has essentially been halved, and no supplier will repay more than the support they originally received,» he said.
«This should contribute to confidence for suppliers, particularly given our balance sheet strength has allowed us to undertake these initiatives.»
Mr Tracy said the changes to the MSSP were essential to ensure «MG’s ability to pay a competitive [farm gate milk price] in the future».
Speaking with ABC Rural, acting CEO David Mallinson would not be drawn on Mr Tracy’s future as MG chairman.
He said it was a matter for the board of directors to decide at their AGM tomorrow.
‘Like pulling a band aid off for six years’
Murray Goulburn supplier Damian Murphy was relieved that the money he will have to pay back has now been capped.
The Gippsland farmer said the announcement was «fairer» to suppliers who were unable to leave the company.
But while the three-year loan extension «will assist with cash flow a little bit», Mr Murphy said it would serve as a long-term reminder of the damage done.
«It’s like pulling a band aid off for six years,» he said.
«Every time it comes up and we’re comparing milk prices between Murray Goulburn and anyone else, we’re always going to be [thinking] ‘oh but there’s that part of the milk support system that we’ve got to account for’ for the next six years.»
Mr Murphy said the company’s decision to take on debt in order to relieve farmers was a first.
«I think it’s a symbolic measure that they’re prepared to take on debt – and put it on their balance sheet for everyone to see – to support milk price,» he said.
«I daresay the board is just making a decision along the lines of ‘we need a certain amount of milk to put through our plant to make it efficient’.
«If [Murray Goulburn] starts losing those efficiencies, the $50m is going to be insignificant.»
Mr Murphy does not think the announcements are enough to attract new suppliers or re-gain those that had jumped ship.
«I think everything will just stay fairly steady at the minute,» he said.
«That’s what the industry really needs, is just a bit of stability for a while.»
Fonterra also lifts prices
New Zealand giant Fonterra lifted its farm gate milk price to $5.10kgms and forecasted a final price of $5.20kgms.
Although the global market remains volatile, since the beginning of the season, global milk supply has continued to decline significantly while demand has remained relatively stable,» Fonterra Australia managing director Rene Dedoncker said in a statement.
«We have seen positive movement in Global Dairy Trade auction prices through August and September, with a 26 per cent increase in the GDT price index since July, although the strong Australian dollar has offset some of the commodity market gains.»
 
Source: ABC
Link: http://www.abc.net.au/news/2016-10-27/murray-goulburn-milk-prices/7970082

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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