MG “forgiveness” a boost to suppliers

MG said “forgiveness of the Milk Supply Support Package” would deliver financial benefits to current and retired suppliers who had already made payments under the scheme.

When MG announced its milk price crash in May last year, the co-operative structured the price drop so that it would continue to pay farmers at $5.47 for the following two months after the announcement.

Then, suppliers were required to pay back the difference between $4.75 and $5.47 for the next three years.

MG last week announced that “in order to mitigate the risk of further milk loss,” all future repayments of the MSSP would cease.

The co-operative also will make a payment to continuing and retired suppliers who made MSSP contributions between July and September last year, and to any suppliers who recommences supplying milk to MG by July 31 this year.

“As a result, MG will record a write-down of this asset of $148 million (post-tax $104 million). MG is taking this step in recognition of the unintended impact of the MSSP,” the cooperative said.

The announcement was welcomed by local farmers hit by last year’s price crash and United Dairyfarmers of Victoria who said it would help rebuild confidence.

The Gazette spoke to Jindivick dairy farmer Ben Elliott last year following the shock announcement. Last week, he said the announcement was great news and would ease a lot of financial pressure.

Mr Elliott, who share farms on the property, said the owner was keen to remain with MG so they had stuck with the company following the price crash.

“It’s going to be great not paying that money back. It was a lot of money when we were already on low prices,” he said.

Mr Elliott said they had been lucky with a good spring and mild summer.

“We were able to grow a lot of feed so we didn’t have to rely too much on buying feed.

“If we could break even we were doing ok. We weren’t going forward, but hopefully we can start going in the right direction after this announcement.

Mr Elliott said they milked more cows and fed less grain to try to maintain production levels.

“We were still down a lot of money though. We’ve tried to keep the farm running the same but we cut back on some things,” he said.

Mr Elliott said having the money already paid to the scheme returned to farmers would be a financial boost.

UDV president Adam Jenkins said the move could have the effect of enticing back farmers who had abandoned the dairy co-operative in the wake of last year’s milk crisis.

“It’s clear that Murray Goulburn is putting farmers first and farmers can now feel like they’re an important part of this business,” he said.

“MG as a co-operative is still very important to the dairy industry and now farmers have genuine hope that things will change.”

But it was a week of mixed announcements by Murray Goulburn who also announced a review of its assets would lead to the closure of manufacturing facilities at Rochester and Kiewa and Edith Creek in Tasmania.

MG said the closures would impact about 360 staff and a net financial benefit to the cooperative of $15 million for the 2018 financial year.

MG chief executive officer Ari Mervis said they were aware of the impact of the closure decisions and would continue to support staff through the transition.

“These have been difficult decisions to make, however they are necessary steps on the journey to ensure the future strength and competitiveness of Murray Goulburn. A strong MG is of fundamental importance to the Australian dairy industry and these decisions are necessary to lay the foundation for the future,” he said.