Murray Goulburn will consider debt funding of up to $100m to shore up the current farmgate price of $5.20kg milk solids (MS).
It’s long been a bug bear for Dairy News Australia that processors have not given their suppliers long-term security to grow in the form of multi-year fixed term contracts.
There is much subsequent hand-wringing about why the national milk pool isn’t growing.
Australian prices are linked to the global market – but the current situation isn’t working. There is clearly a better method than releasing opening milk prices at five minutes to midnight.
And clawing money back from farmers when companies are in error is unconscionable.
Companies talk about re-establishing trust but it’s just lip service if they don’t listen to what farmers have to say. The best businesses, those with a strong culture, know to take all stakeholders along with them, from the very first step.
Which is why processors need to listen to farmers now. The recent milk price cuts are forcing many farmers to consider their future in the industry, and as all processing business models rely on future milk growth, trust needs to be built. At the moment, it’s a rare commodity – as rare as strong governance, it would seem.
ADF acting president, David Basham, says all options are on the table, including future trading for farmers.
If these options are immediately dismissed, then we’re back where we were. If some processors are bold enough to change their payment structure, they may find more farmers are willing to join them.
ADF is funded largely by processors. Some farmers point to this as being in their pocket. If they did not receive this funding, detractors cry, they could rally against them and point more clearly to their problems.
However, there’s a strong argument for being inside the tent, peeing out, and in this case, ADF can use this relationship – and its position on the Australian Dairy Industry Council - to heavily promote these new options.
The current system is broken. There’s a strong argument that it was broken even before MG and Fonterra decided to claw back money from their suppliers.
All new ideas must be considered. If they’re not, then it’s Day 1 of Groundhog Day.