CONCERN is growing for the mental health of dairy farmers after Australia’s largest dairy co-operative, Murray Goulburn cut the price it pays farmers for their milk.
The company’s managing director, Gary Helou stood down immediately after it slashed its profit forecast by as much as 40 per cent.
The chief financial officer, Brad Hingle has also resigned.
The dairy processor said it is no longer feasible to pay $5.60 per kilogram of milk solids, and now expects to pay between $4.75 to $5 per kilogram.
It said the price drop is due to unfavourable changes in the exchange rate, lower than expected adult milk powder sales in China, and a downward revision on the value of the milk supplies it currently holds.
Mead dairy farmer and Murray Goulburn supplier, Dianne Bowles said she feared for the mental health of dairy farmers across the region, most of whom supply to MG.
“This will and could be the last straw for many,” she said.
In its trading update released on Wednesday, Murray Goulburn said it now expects to achieve net profit after tax of between $39 and $42 million. In February it had forecast an after tax profit of around $63 million.
Executive general manager of business operations, David Mallinson has been appointed interim chief executive officer.
Mr Helou said he was proud to have delivered two consecutive years of premium milk prices for Australian farmers.
Murray Goulburn was first listed on the Australian Stock Exchange last May, raising $500 million from investors.
It entered a trading halt last Friday after the co-op closed at $2.14 at the end of trade the previous day.
Trading of Murray Goulburn shares resumed when the Australian Securities Exchange opened, immediately falling 35 cent to around $1.40.
Murray Goulburn said it will pay farmers for milk supplied in May and June as if the price was $5.47 through a milk support payment package.
If its sales and the currency fall in line with the worst case scenario and MG really should have paid farmers just $4.75 for the year, it will mean there is a shortfall of 47 cents for every kilogram of fat and $1.03 for every kilogram of protein.
This money will be deducted from the price paid to farmers evenly over the next three years. It means the milk price will be lower for each of the next three years than it otherwise would have been by about 15 cents for fat and 34 cents for protein.
Murrabit dairy farmer, Andrew Leahy said the farmgate price drop came as a shock.
Mr Leahy, who milks 600 cows on his 500-hectare property, said the high price of water, combined with price cuts, would force farmers out of the industry.
“It’s just unprecedented…the main impact will be people just won’t be able to afford to do it and probably start selling cows and there will be some more dairy farm businesses shaken out of the system that we will lose,” he said.
Mr Leahy produces about 350,000 kilograms of milk solids annually for Murray Goulburn.
“I think we’ll lose a lot of the northern Victorian dairy farmers,” he said.
Gannawarra mayor, Cr Lorraine Learmonth said the news is devastating for farmers, businesses and communities.
“Our dairy farmers are very cost efficient, but with a drop in prices, coupled with the cost and availability of water and continued dry conditions, it will make it very difficult for our farmers to be financially viable,” Cr Learmonth said.
