THE dramatic fall in milk intake by Murray Goulburn has continued with the big co-operative announcing last week that it expected to receive approximately 2.3 billion litres for the 2017-18 financial year.
That forecast is below the expected intake of 2.5 billion litres it announced in June 2017.
And it is a far cry from the 3.5 billion litres it received in the 2015-16 financial year, as detailed in the firm’s 2016 Annual Report, published in August 2016.
The haemorrhaging is unlikely to be stemmed soon, however, with MG continuing to drag the chain on price.
Where Fonterra came out with an increase of 20 cents per kilogram of milk solids (kgMS) to its farmgate milk price for the 2017/18 season last Friday, bringing its average farmgate milk price to $5.50kgMS, Murray Goulburn announced in the same week that it might have trouble achieving $5.50 by the end of the current season.
“While maintaining the forecast FY18 FMP range of $5.20-$5.50/kg MS, if the recent strengthening of the Australian dollar was to continue over the full financial year, this could create some uncertainty in relation to the achievability of $5.50/ kg MS. We will continue to consider all avenues to maximise the available FMP,” said the firm’s Chief Executive Officer, Ari Mervis, in last week’s communique to suppliers.
Additionally, Fonterra has continued to remind the market of its previously announced loyalty payment of an additional 40 cents/kgMS payment which “takes total cash paid to $5.90kgMS and forecast closing range cash paid to $5.90 to $6.20kgMS”.
Here’s what he had to say to suppliers on Monday, July 24, 2017:
“I would like to provide you with an update on some developments regarding your co-operative.
“Milk intake and FMP range: There have been numerous requests from suppliers for information regarding Murray Goulburn’s expected milk intake for the 2017/18 season. At this stage, MG’s total milk intake is expected to be approximately 2.3 billion litres for the period, prior to any significant upside or downside seasonal impact. The reduction in milk intake has not impacted the opening average available Southern Milk Region farmgate milk price (FMP) of $5.20/kilogram milk solids (kg MS). The impact of the reduction in milk intake has been offset by various cost and business improvements compared to budget.
“We will provide a further business update at the time of our FY17 full year results announcement on August 22, 2017, or earlier as required.”
MG will kick off a round of regional supplier meeting after the release of this report.
Mr Mervis also commented on the sale of the Kiewa Country brand and equipment.
“We are pleased to announce that MG has entered into agreements to sell the Kiewa Country brand and certain associated assets to a local business that is expected to recommence local manufacture in the future. The terms and commercial consideration of the transaction are confidential.”
There had been some rumours in the state’s north east that Burra Foods might have been a suitor for the Kiewa assets but Burra declined to comment when contacted by the Sentinel-Times.
MG is continuing with a comprehensive strategic review, having appointed Deutsche Bank AG as its financial adviser.
“As you are aware, a number of initiatives to restore MG’s competitiveness are underway. The cost savings from these initiatives will start to be realised in the current year and increasingly into the future so I am grateful to those suppliers who, like me, see a strong future ahead for MG,” Mr Mervis said.