Murray Goulburn’s price backflip

MURRAY Goulburn has been forced to increase its milk price in an effort to stem the flow of suppliers leaving the company.

The company announced yesterday it would increase its new season opening price from $4.70 a kilogram of milk solids announced two weeks ago to $5.20kg. It has also revised up its full year price to between $5.20-$5.50kg.

The decision comes after rival processor Fonterra announced an opening milk price of $5.70kg for the next season which includes a 40c/kg extra payment to new and existing suppliers.

In a statement to the Australian Stock Exchange, the company said that since the initial price announcement it had reviewed its budget and thehe price reflected im-improved commodity prices and anticipated market returns.

MG said it recognised the competitive environment and need to maintain milk supply.

Meander dairy farmer and MG supplier Brian Lawrence said while the price increase was welcome, the way the company had handled the situation was disappointing. “It is a positive, but there are still some big questions that need to be answered,” Mr Lawrence ssaid. “The worry is that the main reason they’ve done this is because they realised if they didn’t they were going to lose a huge amount of milk. It’s very disappointing it took suppliers having to get on the phone, engage lawyers to look at breaking contracts and say that we just can’t do this for them to increase the price.”

MG’s initial $4.70kg price was well below the cost of production for most dairy farmers and the large price difference between MG and other dairy processors saw many suppliers looking to change companies.

Details about exactly how the increased price would be funded were yet to be released and Mr Lawrence said this was something farmers would be keen to find out.

“The trouble with MG at the moment is they seem to make these decisions and then five minutes later they’re doing a backflip and have to go into damage control,” he said.