TROUBLED dairy processor, Murray Goulburn’s low opening farm gate milk price of $4.31 a kilogram for milk solids for the 2016/17 season has been described as a “bitter blow”.
By the end of next season, Murray Goulburn has forecast that price will have risen to $4.80 a kilogram for milk solids.
United Dairyfarmers of Victoria president, Adam Jenkins said the industry will need to pull together to get through the months ahead.
Farmers consider that they need between $5 and $5.20 per kilogram of milk solids to meet production costs.
Mr Jenkins said there was a desire in the dairy industry to move forward, with the lobby group recognising that Murray Goulburn had deliberately been cautious in its opening price, announced on Tuesday.
The processor had been promising to pay farmers $6 a kilogram for milk solids by the end of the current 2015/16 season.
But, those hopes were dashed in late April when the co-operative retrospectively cut the price from $5.60 to somewhere between $4.75 and $5 a kilogram for milk solids, blaming global oversupply and very low global dairy commodity prices.
Fonterra followed and slashed its farm gate milk price it pays to suppliers. It will now pay farmers an average of $4.75 per kilogram of milk solids.
The figure is higher than Murray Goulburn but below the opening prices of Bega Cheese at $5 and Warrnambool Cheese and Butter at $4.80.
“Dairy farmers are still carrying the weight of Murray Goulburn’s poor management decisions that’s led to the debt they’re being forced to repay on the back of this low opening milk price,” Mr Jenkins said.
He said the cost of production for a kilogram of milk solids is between $5 and $5.50.
Murray Goulburn’s opening price is the lowest since 2009 when farmers were paid just $3.60 a kilogram for milk solids.
“Our concern is the health and well-being of our farming families, and also the service sector that provides such valuable support to the dairy community,” Mr Jenkins said.
Murray Goulburn interim chief executive officer, David Mallinson acknowledged the next 12 months will be challenging for suppliers.
“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 six billion litres of milk,” he said.
Federal Minister for Agriculture, Barnaby Joyce said a re-elected Coalition would meet with the Murray Goulburn board and management to discuss the global and domestic challenges facing the business.
“Coming on the back of a tough Summer and Autumn season, many farmers will need assistance managing the new low price environment and this is why the Coalition is committed to delivering low interest recovery concessional loans for the next two years,” Mr Joyce said.
He promised to convene a symposium of dairy farmers, processors and retailers if re-elected to discuss industry solutions to the challenge that have been exposed by the price cut and cheap supermarket milk.
Meanwhile, Murray Goulburn forecast a net profit for 2016/17 of $42 million, an improvement on the $39 million 2015/16 profit predicted in April.
