FARMERS are scrambling to revise their budgets following Murray Goulburn’s announcement that milk prices would plummet and farmers would be saddled with debt.
Board members fronted an angry mob on Wednesday at the supplier/shareholder meetings on Wednesday in Leongatha. That was after morning meetings at the Devondale MG factory in Leongatha.
Also in attendance was interim CEO David Mallison, supplier relations manager Robert Poole and chief financial officer Brad Hingle.
While farmers came for answers, many left the meeting with more questions, some of which can only be answered at the end of the financial year.
However, some farmers said their colleagues wouldn’t wait that long – that MG had traded on their loyalty and the step-down and debt would act as an incentive for farmers to leave the cooperative, and not attract new suppliers.
A Murray Goulburn spokesperson said the announcements would have an impact on suppliers, expressing the board’s disappointment at putting suppliers “in that position so late in the season”.
So while board chairman Philip Tracey told suppliers he was sorry about the circumstances, the board said they were “very comfortable with the decisions they made”.
“Naturally, in the circumstances the board has reflected on the process that led to [last] week’s announcement and their view is that there is nothing they could have done sooner or differently,” the spokesperson said.
“MG continues to believe in the strong growth potential for MG’s dairy products in China and believes that its value-add strategy to shift away from commodity markets to sell more value-add dairy foods products will continue to add substantial value.
“With commodity markets continuing to trade at 10 year lows, selling more value-add dairy foods, at higher margins, is the best way to cushion against the impact of historically low commodity prices and deliver the strongest possible farmgate milk price.”
Selling value-added products remains the focus of the board, and it said, a way to reduce the impact of the Milk Supplier Support Package (MSSP) which places the debt over four years to 2019.
Calls for MG to borrow the money for the shortfall, or give returns to farmers over the priorities of the unit trust shareholders was not backed by the board.
“The MSSP is being funded from MG’s balance sheet and paid off over the next three financial years,” the spokesperson continued.
“Given the lateness and scale of the change in forecast that has been announced, it was not feasible to correct the milk price over all of the current financial year.
“Therefore the MSSP was designed to assist suppliers by spreading the impact of the current milk pricing shortfall across the next three years.
“The board has also tasked management with generating additional value to further reduce this impact.”
The question whether MG had factored a mass exodus of suppliers into the calculation of the debt pay-off over the next three years was answered: “We understand suppliers are very disappointed and as a result some may chose to leave the co-op,” the spokesperson said.
So, the full price of that ‘debt’ designed to be spread over the cooperative’s suppliers, which will not follow farmers if they choose to leave, will not be known for some time.
Murray Goulburn management blamed poor trading conditions to China as a major factor behind the late decision to announce a step-down.
However, farmers after the meeting expressed concern that the unit holders, which pumped in $500 million into the company following a partial float, were being subsidised by farmers who would effectively earn nothing for the next few months.
Some called for the board to resign, while others said a mass resignation would push the market into a panic, from which it may never recover.
Farmers called for the board of directors not to contest the next elections.
MAX Jelbart, a board member at MG since 2012, resigned from the company last week.
Mr Jelbart, who has been battling illness for several months, announced his resignation on Tuesday.
During his time on the board, Mr Jelbart served on various board committees, including the Finance, Risk and Audit, Compliance and Supplier Relations.
Chairman of Murray Goulburn, Mr Philip Tracy, thanked Mr Jelbart for his service and contribution.
“The Board of Murray Goulburn appreciates that this is a difficult time for Mr Jelbart and his family and offers its full support and best wishes,” Mr Tracy said.
Mr Jelbart’s sons are assisting him to run two farms at Pound Creek and Caldemeade.