MILK processor Murray Goulburn is reviewing its controversial support package for dairy farmers after admitting the program has disappointed its suppliers and is testing their loyalty.
Murray Goulburn chairman Phillip Tracy has released a letter to Murray Goulburn supplier-shareholders acknowledging the problems in the Milk Supply Support Package that was designed to claw back loans made to farmers after a shock cut to farmgate milk prices in April.
“Since its introduction it has become very clear that the MSSP is not considered by suppliers to have addressed their most significant concerns and is potentially proving counter-productive from the perspective of their continued loyalty,” Mr Tracy wrote.
“The board and management are therefore actively reviewing all options with a view to providing a better solution to support suppliers.”
Murray Goulburn introduced the support fund — essentially a loan package for farmers — after it shocked the dairy industry in April with a surprise cut to the price it pays farmers for milk.
It tried to soften the blow by introducing the support fund to add some extra money to the lowered farmgate price.
But that support and the cost of funding, including interest, was to be recovered by Murray Goulburn by docking suppliers’ future milk payments for up to three years.
Murray Goulburn said the package had allowed it to pay an average farmgate milk price of $5.53 for every kilogram of milk solids for 2016 rather than the final price of $4.80/kg.
Interim chief executive David Mallinson said at the release of Murray Goulburn’s annual results in August that the co-operative had to regain the confidence of suppliers.
Mr Mallinson said 2-3 per cent of dairy farmers generally switch processors at the end of each season but this year the figure was about 7 per cent.
“I think it’s (because of) two parts: the absolute milk price and probably a lack of trust,” he said.
Units in Murray’s listed entity, MG Unit Trust, closed down 1.8 per cent at $1.335.
Source: Herald Sun
