Murray Goulburn’s (MG) interim chief executive David Mallinson has defended the company’s conservative approach to its forecast full year milk price, of $4.88 kg/ms.
He said the co-operative was being careful in its latest forecasts, which included a step up of 15c kg/ms, for July to September, to $4.46 kg/ms.
“To be honest, we have done a lot of damage to our reputation, with our suppliers, and it’s a matter of being careful,” Mr Mallinson said.
“I think suppliers are facing quite a bit of stress on their cash flows.”
He said he hoped MG would be in a position to tell farmers about its review of the Milk Supply Support Package (MSSP), before next month’s annual general meeting.
“The concern is the MSSP is detracting from the cash flow, on farm, but we are not in a position to comment on it.
“This was put in, with all the right intentions, but it’s something we have to address.”
He said when he took over the role, from Gary Helou in April, his main focus was on “getting control of the business and the discipline we were missing.”
Mr Mallinson was the commercial director at Fonterra, the world’s second largest milk processor, before joining MG.
He said MG had “copped flak” over the small step up, but “that’s where we saw the market.
“Once we can bank that, and it comes through market returns, or cost savings, it will go back to producers. We need to be realistic, we can only pay out what we get back, from the market.
“I can only pass on what the market is giving.”
He confirmed MG had lost about 300 million litres in milk supply, with 100m litres due to retirements “which are a bit higher than normal.”
“I am not saying losing 300m litres is good, but at the moment, we can deal with that through our factories.”
The company was seeking to shed 200 staff, mainly from the corporate side of the business.
“MG is downsizing to reflect market conditions, like any good company.”
Mr Mallinson also said he believed sales of the VFF Farmers Fund milk would come out of the private label product.
“We do support it, it’s money going back to the farmers, I think it’s done with the right intent, but I know there is a bit of scepticism.”
Meanwhile, Fonterra Australian Milk Supply general manager Matt Watt said it’s July opening price of $4.75 kg/ms and season forecast of $5 kg/ms anticipated improvement in dairy ingredients pricing.
“We’ve seen some positive movement in recent Global Dairy Trade (GDT) results, which suggests a rebalancing of global supply and demand, although it is still early in the season and we are still experiencing continued volatility with commodity prices and the Australian dollar,” Mr Watt said.
“We’ll continue to keep the market informed through our monthly Australia: Global Dairy Update.”
