Dairy processor Murray Goulburn has suspended its controversial Milk Supply Support Payment (MSSP) and revised the outlook price for the 2016-17 season.
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The MSSP is a loan payment made to farmers to help them cope with the retrospective cut backs to the farmgate milk prices announced for the last two months of the 2015-16 season.
The processor, that has contract suppliers in Tasmania, announced a review of the support payment in September and announced in a letter to its suppliers that the payment would be suspended from October 1.
Dairy farmers have been struggling to cope with the retrospective pricing, seen as the most difficult part of the sweeping price cuts made by Murray Goulburn and Fonterra earlier in the year.
Along with the suspension of the MSSP Murray Goulburn has also announced a revised forecast milk price for the 2016-17 season.
Suppliers to Murray Goulburn can expect a revised outlook price of $4.70 per kilogram of milk solids (kgMS), which is revised down from an expected $4.88kgMS.
The revised forecast price is the price farmers can expect to step up to throughout the year and is dependent on seasonal conditions.
Farmers are receiving on average $4.46kgMS after application of the MSSP repayment. The suspension of the payment is expected to put back an average of 14c kgMS into the farmer’s pocket.
It costs an average of $5kgMS to break even so the suspension of the payment would put the figure closer to cost of production but is still not enough to ensure a profit.
MG advised its suppliers the broader review of the MSSP was still ongoing and the outcome would be known prior to the company’s AGM, scheduled for October 28.
Federal Member for Braddon Justine Keay and Federal Member for Lyons Brian Mitchell have expressed their frustration after Murray Goulburn announced the cuts to the forecast price.
“What farmers need now is security, and today’s announcement of an expected $4.60 per kilogram of milk solids is well below what they need to meet production costs,” Ms Keay said.
Ms Keay said suspending the MSSP was “beyond comprehension” because the payments were still too low.
Mr Mitchell said Murray Goulburn’s excuses like “wet weather”, were difficult to swallow.
“In today’s statement to the ASX the company states its $42 million after tax profit will be lower as a result of reduced milk intake, but doesn’t say by how much,” Mr Mitchell said.
“The last thing farmers affected by floods need is for their payments to be cut. Murray Goulburn should be helping its suppliers, not increasing their anxiety about their viability.”
Ms Keay and Mr Mitchell demanded the urgent intervention of Agriculture Minister Barnaby Joyce.
“Barnaby has been nowhere to be seen on this issue and I’m pretty sure he doesn’t even know where Tasmania is,” Ms Keay said.
“Despite recently writing to him and the Tasmanian Liberal Senators about farmers’ concerns I’m not surprised I haven’t received a reply.”
“Mr Joyce needs to do his job and come down to Tasmania and listen to Tasmanian farmers,” Mr Michell said.