Australia’s largest dairy processor, Murray Goulburn (MG), has announced an opening price of $4.31kg/ms, after its supply package repayment is taken into account.
The forecast closing price is $4.80kg/ms, MG interim chief executive David Mallinson said.
“The net opening (price) is $4.31 per kgms, after application of the supply package repayment amount of $0.14 per kgms (one cent per litre),” Mr Mallinson said.
“As financial year 2016 is not yet complete and the final Milk Supply Support Package (MSSP) amount cannot yet be determined, MG has elected to reflect an initial MSSP repayment amount of $0.14 per kgms, with the balance to be recouped from future step ups.”
The co-operative cut its price from $5.60kg/ms this year to $4.75-$5, offering farmers the MSSP to keep the price at $5.49kg/MS. The is a loan, to be paid back over the coming three years, with interest.
“Commodity prices remain the largest external influence on MG’s financial performance,” Mr Mallinson said.
“Global conditions have not improved, and the latest data suggests excess global inventories, including the impact of European intervention, may have surpassed the equivalent of 6 billion litres of milk.
“Key commodity prices have remained below US$3,000 per tonne for almost two years, much longer than historical price downturns.”
He said in the face of difficult market conditions, the forecast for the coming financial year reflected MG’s view commodity prices would continue to trade around current levels, for the rest of the calendar year,
A modest recovery, of about six per cent, across MG’s major commodities was expected during the second half of next year.
“This prolonged environment of lower prices means MG expects to achieve lower average selling prices for commodities throughout FY17 when compared with FY16, which will impact the distributable milk pool by about $95 million.
“We acknowledge FY17 will be a challenging year for our suppliers,”Mr Mallinson said.
“We have set a robust forecast, and while there are a number of areas which may provide upside to our FY17 forecast, we do not believe it is prudent to include these in our forecast at this stage.
“Should more positive conditions emerge, MG will be vigilant in ensuring any upside passes to our suppliers and investors,” Mr Mallinson said.”
He said the company hoped to generate additional efficiencies and improve cash flow next year, by controlled exit of inventory holdings and reduction in group net working capital levels.
The company would also introduce a targetted reduction in cost reduction across the business.
A new “cut and wrap” cheese facility, in Cobram, was also expected to have an effect on incremental earnings.