Milk Price Announcement – Murray Goulburn

The value of trust
and loyalty in any business relationship cannot be underestimated. For the dairy industry, a strong relationship, based on the pillars of trust and
commitment, has been an essential part of growth and investment.

Across a large part of the current dairy landscape, not only has trust and loyalty been compromised, but so too has confidence. We acknowledge the priority
being given to restoring relationships, but we also acknowledge this will take some time to achieve.

To ensure ongoing growth and profitability, there is agreement that our industry relies on all elements to operate effectively. Dairy farmers need processors,
processors need retail outlets and retail outlets need consumers.

The news of Murray Goulburn’s opening price and expected farm gate returns for the 2017-18 season has come as a severe disappointment to their farmers’
suppliers and the industry.

Their announcement comes at a time when their competitors have a growing demand for milk supplies, largely due to the positive movements in the world market
and the confidence that our farmgate prices will follow. Unfortunately, it appears the path Murray Goulburn has taken has left the company facing severe
commercial challenges.

This will also have a big impact on their farmers.

Almost a third of Victorian farmers, as well as suppliers in Tasmania and South Australia, will face another year of milk returns which are below their
cost of production.

Murray Goulburn has been a market leader for farm gate returns for the best part of three decades. It now finds itself unable to come close to matching
the milk prices offered by other companies.

There are no doubts the dairy crisis caused by the combination of low world market prices and last year’s unexpected price drops have impacted the outlook
of many farmers as they consider their future.

Milk production in Australia has fallen by more than 8% in 2017 compared to last year. A number of factors, including heavy culling of stock, contributed
to this. In many cases, this was in response to a need to cover costs. As a result of these events, confidence and loyalty to companies have taken
a heavy toll.

The ongoing growth and profitability of the Australian dairy industry are attributed to the presence of strong cooperatives and we agree that this should
continue, if possible.

Murray Goulburn’s new management team and the Board are clearly doing all they can to restore the fortunes of the company. Their immediate challenge is
to provide a competitive milk price which, if not addressed, presents a risk to the company and to their farmers.

Farm businesses and the health and wellbeing of farmers and their families must be a priority for the industry. This can be achieved by continuing our
commitment to deliver services and resources to assist farmers in their business decisions.

Competition for milk is strong and shows no signs of slowing down. Our industry needs to start growing so that we can be in a position to supply the markets
available to us – both the Australian domestic market and those around the world.

ADF cannot enter into the business decisions of companies and the business decisions of their suppliers.

What we can do is work in collaboration with our SDO’s to seek solutions which will create the right environment for dairy companies to prosper and grow,
along with a strong focus on our dairy farmers to grow their business and profits.

Now, more than ever, the industry needs to remain focused and united in its goals to achieve a strong profitable future for dairy farmers.

Terry Richardson

Interim ADF President

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