When Victorian dairy farmers Bec and Glen Casey found out the Murray Goulburn milk price cut meant they had lost two years’ profit in one day, they were in total shock.
They had been finessing their budget for months to deal with the unseasonably dry weather, which has put many of the state’s dairy farmers under severe financial pressure.
The Caseys’ fodder bills were rising and water bills were looming, but they were confident they would make it to the end of the financial year, when a new “opening” milk price for the next 12 months would be announced.
Murray Goulburn (MG), the company they sell their milk to, announced last week it was cutting its milk price, and seeking to recover the money it says it has overpaid its farmer suppliers over the last 10 months.
“I knew that because of all the downward trends next year’s opening price would be a lot lower, but I was completely blindsided by this announcement,” Mrs Casey said.
“Two years’ profits gone in one day. Glen feels like someone’s come in and taken half the herd from underneath him, he’s absolutely gutted.
“A lot of our budgeting relies on mother nature, which is a massive uncertainty for us. We have to have faith that the price that they open with is the price that they are going to stick to for the season.”
Victorian dairy consultant John Mulvaney said his MG clients were still in shock.
“People are having difficulty understanding how you can receive a price for a product and then the person who’s paid to that price come back and say ‘I’m sorry we’ve overpaid you we need some of that money back’. Very simply that’s what’s occurred,” he said.
“I have had calls from people, particularly younger farmers, who already were under some pressure as a result of difficult seasonal conditions this year.
“They’re running fairly high debt levels and some of those — not many of them but some of them — may not survive.”
New financial situation ‘absolutely gut-wrenching’
The Caseys, who run a 320-cow sharemilking operation at Inverloch in South Gippsland, are not alone — 2,500 dairy farmers in four states are affected.
The average “debt” is between $100,000 and $120,000 and farmers have three years to pay it back, with interest.
The Caseys owe $103,000. An emotional Mrs Casey broke down as she grappled to explain their new financial situation.
“To have corporate come in and put us in this position is just absolutely gut-wrenching,” she said.
Murray Goulburn’s managing director Gary Helou and chief financial officer Brad Hingle resigned last week, and this week two MG board members followed suit.
Chairman Philip Tracy fronted heated and emotionalsupplier meetings throughout Victoria this week to say sorry to farmers, some of whom will be hit twice as they bought shares in the company when it partially listed on the Australian Stock Exchange in July last year.
The share price fell 42 per cent in one day following news of Murray Goulburn’s second profit downgrade of the year.
“We have just apologised to the suppliers for the absolute disappointment that we’ve created. To put them in a position where they had expectation taken away from them, it has caused a lot of financial hardship for our suppliers and that’s not what we’re about and we’ve got to make sure that trust is re-won,” Mr Tracy said.
Mental health concerns for dairy farmers
There is now an air of panic and gloom in southern Australia’s dairy industry, with some farmers leaving Murray Goulburn to supply other dairy companies.
As their so-called “debt” does not follow them, it leaves believers in the co-op system like the Caseys with a difficult choice: stay and share the financial pain with your fellow farmers or quit supplying the company and possibly save your business.
On Thursday, New Zealand dairy giant Fonterra announced it was cutting its milk price too.
“It’s a horrendous situation for everyone concerned,” Fonterra’s Australian managing director Judith Swales said.
Like MG, it is seeking repayment from suppliers it has overpaid, though Fonterra’s 1,000 suppliers will have until 2018 to start paying their debt down.
United Dairy Farmers Victoria president Adam Jenkins said the whole industry was worried about the mental health of farmers.
“We’ve spoken to the State Government and making sure mental health is right there in everyone’s mind,” Mr Jenkins said.
“It’s a big knock to confidence of people. The spill-on effect to the community is big.”
Mrs Casey said consumers could help by backing the Murray Goulburn brands.
“This wasn’t something the dairy farmers saw coming, we had no control over it and the buck unfortunately is apparently stopping with us,” she said.
“So we really need people to go out there and support us.”