Report: SOPHIE BALDWIN
Photo: LUKE HEMER
MURRAY Goulburn suppliers have been condemned to an opening price well below the average cost of production.
An announcement which almost ensures those suppliers will run at a loss for another year.
And which might spark a stampede to other processors such as Bega.
It has delivered an opening price of $5.50kg of milk solids – 80 cents more than MG’s $4.70.
Bega’s price has been welcomed by the industry while MG’s has been met with disbelief and anger by its supplier base.
One local herd, milking 260 elite cows averages 145,000kg of milk solids per year.
As a MG client that would gross $681,500.
The same client selling to Bega would receive $797,500.
The $106,000 difference would take most families out of debt.
Some people the Riv spoke to lost $200,000 last year and are budgeting to lose even more this year because they are locked into contracts.
In an unprecedented move MG chief executive Ari Mervis apologised to suppliers after he implied the cost of production on all farms was below $4.70.
He also told suppliers he appreciated patience doesn’t pay the bills, but the management team has a single focus on fixing the business, and urged suppliers to continue to support the co-op.
MG supplier Ann Gardiner said this is her third year of poor prices from MG and the industry including her own business, were now at a significant crossroads.
“I was trying to be positive and hopeful but I will be honest and say I felt gutted after this latest price announcement,” Ann said.
Having had 48 hours to recover and think about the opening price, Ann said she was now concentrating on the future.
“We need to answer the question if we want to farm for a loss again or work hard to break even if we are lucky,” she said.
“It is important to not react in fear and anger and process the information and look at your own business and the options that you have.”
Ann said many suppliers will now be asking themselves if they have “the emotional and mental strength to get through another year and what is the best way forward”.
“The general feeling in the dairy community is that we feel let down by our processors and there is no trust left anymore.”
Bega suppliers Stu and Clare Modra from Gunbower are happy with their company’s opening price.
“Bega’s $5.50 is above the cost of production for our farm and our system and a price like that will allow us to start to pay back some debt. It’s a good starting point and it where the price needs to be,” Stu said.
Stu said while the cost of production fluctuated each year and is dependent on commodity prices, he believed this year his own cost will sit somewhere around $5.30 kg of milk solids.
“Water, hay and grain should all be reasonable this year and despite the tough start to the season last year, it turned out to be not as bad as we first thought it was going to be.”
The couple swapped from Murray Goulburn to Bega in January of this year – moving companies has been a positive step and given them confidence for their future.
“The difference in an opening milk price of 80 cents between Murray Goulburn and Bega is huge.
“Let’s just say you produce 100,000kg of milk solids annually then you are looking at $80,000 extra in your pocket which is a significant amount of money.”