Feb 16, 2017

The continuing crisis in the dairy industry

The dairy industry is in crisis and dairy sustainability is under attack.

In Victoria — where most dairy farms are — Australia’s largest processor, farmer-owned co-operative Murray Goulburn, allowed outside investors to become members, to get the funds to build more infrastructure to take advantage of export opportunities. Murray Goulburn prioritised paying returns to those investors out of their 2016 $44 million annual profit, rather than to the farmers who supply the product.

An overestimation of the global market price meant that when milk prices dropped, Murray Goulburn slashed its farm gate milk price without warning last April to $4.31 a kilo of milk solids or 33c a litre and told farmers they had to repay the higher price they had been receiving. Fonterra, the other major processor, matched the farm gate price drop.

As former chief executive Gary Helou left Murray Goulburn in May with a $10 million payout, farmers were left owing an average $120,000 “overpayment” debt, based on payments set at his promised and “achievable” $6 a kilogram milk price. A 38% rise in the board directors’ fees added insult to injury.