Wednesday, 14 June 2017 09:23

Another lost season for farmers

Written by  Rick Bayne

Farmers have been surprised and in some cases angered by Murray Goulburn’s lower than expected opening prices, however some are adopting a measured response.

MG will open the new season at $4.70/kg milk solids with a forecast closing price of between $5.20kg and $5.40/kg MS. Farmers had expected the price to start in the low $5s but while some say they will look at other supply options, others are putting their hope in early-step ups.

While disappointed with the opening, farmers are saying they understand MG taking a conservative approach to avoid the possibility of step-downs.

The co-op said the final forecast is subject to various assumptions, including “dairy commodity prices, exchange rates and achieving cost out initiatives, as well as achieving milk intake of approximately 2.5 billion litres”.

Farmers are saying they will review their numbers and not take any impulsive decision about supply.

Crossly farmer Karrinjeet Singh-Mahil said farmers “should do the numbers before assuming the worst”.

“When we moved to MG they had the lowest headline price and still do, but when we did the numbers we were still financially better off because we got more for FMI, fat etc. We know of farmers who moved for a better headline price without doing the numbers and they would have been better staying with MG. You cannot compare apples with apples without doing your own numbers.”

“As an industry we need to change the way prices are announced so you can easily compare, but in the meantime we need to survive. And for us to survive, we need a strong co-op. If you do your numbers, you'll find that MG's price is a far more honest one than many others.”

Dianne Bowles from near Cohuna in northern Victoria, said the early announcement took her by surprise, but the price didn’t meet her expectations.

“We’d asked for an earlier announcement, it’s just not a number I like,” Mrs Bowles said.

She said all farmers needed to do an income estimate and really compare milk company prices.

“It’s tricky because they’re all different but you need to do your numbers properly and know how they fit your business,” she said.

Mrs Bowles said a preliminary estimate indicated that her farm’s flat supply should see it achieve prices in the upper ranges of the weighted average.

“We can’t make money at $4.70 so it’s not fantastic,” she said. “We had hoped for something starting with $5 but I suspect they have a bit more up their sleeve than they’ve opened with. I would hope that’s not all they’ve got.”

“Coming on the back of some really hard years it’s a long way back to recover.”

Mrs Bowles added that MG was communicating with suppliers and, despite the disappointment that came with closing factories, was joining farmers in looking for efficiencies.

Macarthur supplier Craig Dettling said the price was lower than expected but he was taking a long-term outlook.

“We were hoping for $5 but we run a pretty low cost operation so we can get through,” Mr Dettling said. “Without the Co-op the industry wouldn’t be as strong.”

Mr Dettling said that while the price was lower than he hoped, he understood the reasons.

“When you look at the reasoning behind it with the volatility of the global market, the worst case would have been if they opened too high and had to step down again.”

“We just need to have any improvements passed on straight away.”

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