Co-op axes unpopular milk plan

MILK processor Murray Goulburn has dumped its unpopular support package for dairy farmers in a bid to shore up its milk supply and lure back farmers who abandoned it after last year’s shock cut to the farmgate milk price.

Murray Goulburn will also axe up to 360 jobs, close three older processing facilities and suspend dividend payments as it endeavours to improve its financial performance.

The co-operative will take a $410 million hit from writedowns and restructuring.

Murray Goulburn announced it would forgive debts owed by farmers under its controversial Milk Supply Support Package (MSSP), introduced at the same time the co-op cut the price it paid farmers for their milk in April, 2016.

Under the MSSP, Murray Goulburn made payments above the reduced farmgate milk price but required farmers to repay it from their future milk payments, causing some to switch to other processors.

Murray Goulburn will also make a special payment to continuing and retired suppliers who made MSSP repayments between July and September 2016, and to any suppliers who start supplying it with milk again by July 31.

Chief executive Ari Mervis, who took charge of Murray Goulburn in mid-February, was critical of the MSSP.

“Not only had it created a financial burden on the farmers, perhaps more importantly it created an emotional burden or disconnect between the suppliers and their co-op,” Mr Mervis said.

“The board had recognised that this had caused a significant outflow of milk and had the potential to incite further milk outflows.”

Murray Goulburn will close its Edith Creek manufacturing facility in Tasmania by December, while the Rochester plant in northern Victoria will shut in March, 2018, followed by the Kiewa facility, also in Victoria, in September. The closures will cost about 360 jobs, saving the co-operative between $40 million and $50 million a year.

Murray Goulburn said that, due to weaker trading conditions, the forecast farmgate milk price for 2017 had been downgraded from $4.70/kg of milk solids to $4.60, but the co-op was committed to paying an average of $4.95 which it promised in October 2016.