MG ‘more exposed’ to world markets

LETTER TO THE EDITOR:

SINCE announcing our revised farmgate price five weeks ago, Murray Goulburn Co-operative has been justifiably criticised for letting our farmer-suppliers down and causing industry turmoil.

And while the debate about Murray Goulburn and the dairy industry more broadly will continue for some time, it’s important that it does so with knowledge of the facts.

Australians love their dairy; in fact we have one of the highest rates of dairy consumption in the world.

However, the country produces about 35 per cent more milk than it can possibly consume and that milk supply has to find a market elsewhere.

Murray Goulburn is Australia’s largest dairy exporter and we derive around half our sales from international markets.

As a result, we are more exposed than most Australian dairy companies to the vagaries of commodity markets and foreign exchange.

Dairy commodity markets have fallen sharply in the past year, trading at levels not seen since the global financial crisis when Australian processors were also forced to reduce farmgate milk prices.

Murray Goulburn has navigated this difficult environment by producing dairy food products and added value ingredients which deliver higher returns and reduce exposure to bulk commodities.

Ultimately, these efforts were not enough.

Supermarket brands have been singled out as one of the causes of dairy’s woes, but in fact the opposite is true.

Our 10-year daily pasteurised milk supply contract with Coles is a very good deal for our farmers.

It delivers a premium above the farmgate milk price and a guaranteed market for our farmers’ milk.

It has helped secure much-needed investment in the sector.

So while I applaud the support consumers have shown for the dairy industry, boycotting supermarket brand milk in the end doesn’t help our farmers or our industry.

It doesn’t matter which milk you buy; what matters is that you keep buying milk and all the other dairy products you love to consume.

Global commodity markets will rebalance in time, but the timing of that recovery is beyond our control.

What is in our control is how we invest our capital to deliver value above whatever commodity markets deliver and that we continue in our efforts to carry our suppliers through this downturn, which is delivering unsustainable milk prices to dairy farmers throughout the world.

We remain confident of the long term prospects for Australia’s dairy industry and that improved milk prices will ultimately return for our farmers.