Opinion piece – Lachlan Polkinghorne ProAdvice
When organisations try to manipulate the supply/demand fundamentals someone generally gets hurt – it is regularly the farmer. The wool industry has struggled to recover from the impact of the reserve price scheme in the 80s. More recently, Murray Goulburn (MG) have chosen to ignore the low global dairy price that was clearly evident and transparent in the world dairy markets over the last 12 months.
Speculation is rife as to the underlying motivation in the MG camp, and their delayed reaction to a low world milk price: MG announced they had ‘changed strategy’ to value adding; MG had raised capital on the prediction of a $6/kg milk solids (MS) milk price; Production didn’t fall in other markets; and the $A didn’t keep falling. Only the board and management really know why, with only the board left!
It is inexcusable to make payments to suppliers for 9 month and then announce ‘actually 10 to 15% of that income payment was a loan’. Farmers had continued to make spending decision on cow numbers, feed and fertiliser, R&M, capital and personal spending based on a $5.60/kg MS price (that is likely to increase). This spending will have added to the overall liability build up by the unsuspecting farmers and they also kept the milk churning out – exacerbating the problem. Read More