Dairy co-op suspends supplier support plan

MURRAY Goulburn has suspended its Milk Supply Support Package (clawback) for the current season.

In May the co-operative sent the dairy industry into a tailspin when it announced it was cutting the milk price — and said suppliers had been ‘overpaid’ and would have to refund a large portion of their milk income for the 2015-16 season.

Not long after Fonterra followed suit, plunging the industry into despair. To rub salt into the wounds of Fonterra suppliers, the New Zealand-owned company then went on to announce an after tax profit of $800 million for the 2015-16 season.

The fallout from these announcements has been enormous — some farmers have been forced to quit and sell up, buried under a mountain of unplanned debt, while others have reduced stock numbers and slashed operating costs in a desperate bid to hang on in the industry they love.

One thing that is for sure, it has been a stressful and worrying time for the region’s dairying industry and wider economic community.

Murray Goulburn’s latest decision has been made after it recognised the severe financial strain its suppliers were facing due to wet conditions, low milk prices and the MSSP.

Interim chief executive David Mallinson said it was MG’s absolute priority to return cash to farmers’ pockets while being financially prudent.

Suspension of the payment should add an extra 14 cents per kilogram of milk solids to cash flow — except at the same time the co-op has downgraded its end of year financial price from $4.88kg to $4.70, leaving farmers a further 4 cents out of pocket per kilogram.

The co-op has offered a growth incentive payment to suppliers who increase production for this season compared to last year, an incentive that will be unobtainable for many.

Nanneella’s David Glass is waiting for confirmation from his field officer but his early understanding is the co-op has taken away the clawback for 12 months, but dropped the forecast EOY price.

‘‘It may help with our cashflow in the short term but it still doesn’t give me a huge amount of confidence,’’ Mr Glass said.

‘‘There are some great incentives in there for growth but who is going to make them when every single farmer I know has experienced production losses for the year due to the extremely wet conditions and through reduced herd numbers.’’

He also questioned what happens with the MSSP after the end of the financial year?

To add to industry woes, the wet spring has compromised hay and silage quality with most farmers unable to get onto their paddocks to cut fodder at the optimum time.

While there will be quantity around, sourcing good quality could become a problem and will further impact on production losses through the season.