Organic dairy co-op goes into voluntary administration

Organic Dairy Farmers of Australia Limited (ODFA) produces the True Organic brand of milk, butter and cream.

It also supplies milk to FiveAM yoghurt, Pure Organic milk and Lemnos cheese.

Worrells Solvency and Forensic Accountants were appointed voluntary administrators on May 15.

Established in 2002 as a co-operative, ODFA is owned by more than 40 farmers who supply fresh, organic milk from three main dairy regions of Victoria, as well as central, and north-west Tasmania.

Worrells said ODFA operations were trading, with all employees continuing in their respective roles.

According to a statement from Worrells, the appointment follows "a range of external pressures".

Worrells partner Scott Anderson said the co-op had been participating in a joint venture with Corio Bay Dairy Group to build a milk dryer and had recruited extra members to boost milk supply.

He said the construction and commissioning had been delayed, meaning the freshly-acquired milk had not been able to be processed through the new facility, leaving it with surplus milk.

That, coupled with the impact of the coronavirus on the Chinese market had led to ODFA's move into voluntary administration.

Mr Anderson said there was no suggestion that Australian retailers had any role in the cooperative's distress.

"In my discussions with the board, prior to the appointment last Friday, there had been no mention of supermarket conduct being a factor in these circumstances," he said.

The administration was in its infancy, and Worrells was still assessing ODFA's operations but all relevant stakeholders had been notified.

It was too early to say how much the farmer shareholders would be left out of pocket.

"Unfortunately, I will absolutely recognise that the members and farmers are owed a significant sum in relation to the May milk cheques for the April milk," Mr Anderson said.

"There is a bank facility that far exceeds the amount which is owed to farmers, and we're working as best we can to continue to trade to give the members some certainty going forward whilst we're looking at all options to secure the viability of the coop and its operating assets."

Mr Anderson said all milk supplied by members to the co-op during the voluntary administration period would be paid for.

"I guess the key issue that everyone wants addressed is what the status is of the milk supplied in the immediate period up to the appointment of the administrators," he said.

"Ideally, we'd be in a position where I could give more members absolute certainty as to that but that's something we're working towards at the moment with the other stakeholders who are involved and the financial circumstances.

"I'd like to give some sense of appreciation and outline that the administrators absolutely understand the nature of the impact that it has on members and we appreciate the ongoing support that the members are providing to the co-op during the process because they're integral to the future viability of this and that's what we're seeking to achieve."

It appeared that ODFA did not require a lump sum from members to join the cooperative but that a share offtake system based on milk volumes supplied, similar to that of Murray Goulburn's, had been in place.

Worrells was optimistic about ODFA's future.

"We understand the enormous value and potential for the co-op," Mr Anderson said.

"We have a robust strategy to turnaround its predicament for long-term viability and success."

ODFA farms are Australian Certified Organic, with many also Chinese Certified.

Worrells invited parties interested in discussing options for the acquisition or continuation of ODFA's operations are invited to contact its Geelong office.

It said the objective of the voluntary administration regime was to allow businesses to address issues and, if possible, with creditor approval, return it to a healthy trading prospect.

The first meeting of creditors has been scheduled for 27 May 2020.

A second meeting of creditors would likely be held within 20 to 30 business days, when creditors of ODFA will determine the future for the business.