SOUTH East dairy farmers have been delivered another major blow with an industry processing giant’s shock announcement of rock-bottom farmgate milk prices.
Victorian based processor Murray Goulburn this week announced an opening price of $4.70 per kilogram of milk solids for the next milk season, as much as 80 cents less per kilogram than rival processors.
South East dairy farmer James Mann said milk payments would plummet below the cost of production for many local suppliers and revealed a number of local farmers would likely abandon Australia’s largest processor entirely.
“Some farmers will make a profit at $4.70, but the vast majority won’t,” Mr Mann told The Border Watch.
“The opening price is well below the price many Murray Goulburn suppliers expected – we anticipated the opening farmgate price would be around the $5 mark.”
Mr Mann said with an $80m milk powder plant near Penola on track to start production in July, many suppliers would seek greener pastures.
“There is plenty of spare capacity within the industry, with the Midfield Group opening the new processing plant at Penola, Beston Foods at Murray Bridge and Fonterra in Warrnambool, the question becomes how much milk will leave Murray Goulburn?
“I think it’s likely many suppliers will leave.”
Murray Goulburn’s conservative farmgate price follows The Union Dairy Company revealing farmers would be offered a “very competitive opening price” when the processing facility opens next month.
Managing director Daniel Aarons told The Border Watch in May the plant would need 200m of raw milk per year and promised the company would work to achieve a robust price for farmers, cash flow, transparency and simplicity of milk payment structures.
While the Victorian Farmers Federation welcomed Murray Goulburn’s “honesty and transparency,” president Adam Jenkins said the opening price presented a serious challenge for dairy farmers.
“The early release of an opening milk price shows Murray Goulburn has listened to industry and the farming community,” Mr Jenkins said.
“We recognise Murray Goulburn is in a challenging situation trying to navigate its way from the past into the future, but a $4.70 opening price presents a serious challenge for dairy farmers who are still recovering from the events of last year.
“The importance now is for MG to deliver returns to farmers as soon as the returns are realised in the marketplace.”