MG squeezed by rising $A and falling supplier numbers

MG feels squeezed by rising $A and falling supplier numbers


Murray Goulburn co-operative has downgraded its southern Australian milk receival expectations for 2017-18 from 2.5 billion litres to about 2.3b.

Murray Goulburn co-operative has downgraded its southern Australian milk receival expectations for 2017-18 from 2.5 billion litres to about 2.3b.

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The Australian dollar's recent rises may undermine hopes for Murray Goulburn to lift farmgate milk payments

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Murray Goulburn co-operative is warning the Australian dollar’s recent rapid rise may undermine hopes for its farmgate milk payments to rise to $5.50 a kilogram.

While maintaining its forecast for farmgate milk payments to range between its July 1 opening price of $5.20/kg and $5.50/kg (milk solids), Murray Goulburn (MG) has told suppliers if the currency’s strengthening trend against the US dollar was to continue during 2017-18 “this could create some uncertainty in relation to the achievability of $5.50/kg MS”.

Since early June the dollar’s value has climbed from just under US74 cents to US79c today, having briefly touched US80c during overnight trade last week.

MG said it was continuing to consider other avenues to maximise the available farmgate milk price.

However, the big co-op’s options have been put under pressure by an exodus of suppliers to rival milk processors offering more attractive opening prices in the past two months.

MG has now downgraded its southern Australian milk receival expectations for 2017-18 from 2.5 billion litres to about 2.3b after assessing the number of suppliers on board at the start of the new season.

Last financial year MG collected about 3.5b litres from suppliers in Victoria, Tasmania, South Australia and southern NSW.

It has assured its suppliers the likely cut in milk intake would not undermine on its opening average southern milk region farmgate price.

“The impact of the reduction in milk intake has been offset by various cost and business improvements compared to budget,” the company said.

It would provide a further business update when it released its full-year results for 2016-17 on August 22, or earlier, if required.

MG had originally made an early, but unpopular, announcement promising an opening price of just $4.70/kg (MS), which was revised just weeks later after other dairy companies followed with opening prices of up to $5.50.   

Meanwhile, the co-op has confirmed it will be selling certain factory assets associated with its Kiewa Country brand, enabling a local business to recommence manufacturing “in the future”.

MG’s Kiewa factory is one of three the company is closing as part of a major restructure and cost cutting drive.

The northern Victorian plant was expected to pack its final line of Kiewa Country Milk next week, leaving about 130 MG staff out of work.

The terms of the Kiewa transaction are confidential.

MG has also appointed Deutsche Bank AG as its financial adviser during its comprehensive strategic business review.

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