Murray Goulburn, the Australian co-op, has set an opening farmgate milk price of AU$4.31/kgMs for 2016-17 for its 2,500 farmer suppliers.
The co-op, which processes one-third of Australia’s milk supply, also forecast for that price to rise to AU$4.80/kgMs by the end of the next season.
Interim Chief Executive Officer with Murray Goulburn, David Mallinson, said that commodity prices remain the largest external influence on the co-op’s financial performance.
“Global conditions have not improved, and the latest data suggests excess global inventories, including the impact of European intervention, may have surpassed the equivalent of 6 billion litres of milk.
“Key commodity prices have remained below US$3,000/t for almost two years, much longer than historical price downturns.
“In the face of these difficult market conditions, the forecast fiscal year 2017 (FY17) FMP reflects Murray Goulburn’s view that commodity prices will continue to trade around current levels for the remainder of the 2016 calendar year with only a modest recovery in price of around 6% across Murray Goulburn’s major commodities during the second half of FY17.
“This prolonged environment of lower prices means MG expects to achieve lower average selling prices for commodities throughout FY17 when compared with FY16, which will impact the Distributable Milk Pool by approximately AU$95m,” he said.
Mallinson said that the co-op acknowledges that FY17 will be a challenging year for its suppliers.
Earlier this year, Murray Goulburn announced that it had paid its 2,500 supplier farmers too much for milk over the 10 months up to May.
It has been estimated that this overpayment is in the region of €125m and the co-op has said that suppliers will have to pay this back.
It said that it will manage this via adjustments to the milk payments over the next three years by introducing a Milk Supply Support Package (MSSP).
The net opening farmgate milk price is $4.31/kgMs, after application of the MSSP repayment amount of $0.14/kgMs (equivalent to 1c/L).
However, the co-op has said that as FY16 is not yet complete and the final MSSP amount cannot yet be determined, it has elected to reflect an initial MSSP repayment amount of $0.14/kgMs, with the balance to be recouped from future step ups.
Australian farmers left ‘gutted’ by milk price cut
Reacting to the Murray Goulburn opening farmgate milk price, President of the Victorian Farmers Federation, Adam Jenkins has said that farmers are “gutted” by the announcement.
“It’s left many of us floundering, wondering how we’re going to break even. There’s a lot of anger out there.
“And we can all kick, scream and call for re-regulation. But the reality is we have to deal with the here and now.”
Jenkins said that the removal of quotas in Europe and low feed prices in the US means that the global market will continue to be over-supplied.
But, he also said that it’s not all doom and gloom; the price of energy, fertilisers, feed are down. Interest rates are declining, which all helps reduce farmers costs of production, he said.
“I’m the first to admit that times are going to be tough in the season ahead. But there’s no point just getting angry and going into denial.
“We all have to get back to basics – basic principles on farm and in the factories. We can’t afford to run high cost, high risk farming or milk pricing systems anymore,” he concluded.
