I was digging a post hole today when my phone binged a message in my pocket. And binged again and again and again and again.
I paused to check the messages, still with the post hole digger under my shoulder and stared in shock at the Murray Goulburn announcement.
As the biggest milk processor, MG tends to set the benchmark price and, in the new financial year, it will be $4.31 per kilogram of milk solids or about 33 cents per litre. After you take off the compulsory fees the processor charges for milk collection, it’s around 30 cents. Even less again for the many Gippsland farmers whose cows calve in Spring in line with Mother Nature.
It costs a farmer like me about:
- 40 cents to produce a litre of milk when the season is good and nothing goes bust and the bank is happy with interest-only; or
- 42 cents to make milk and maintain the farm; or
- 45 cents to breathe and grow.
On top of the drought we’ve just endured, this fresh set of bad news will finish many farmers off. Not just the inefficient producers, either. Far from it.
Those coasting along with little debt will emerge at the end of the year with the fewest scars. In fact, it will be the youngest, most ambitious farmers who heeded the calls for growth from Murray Goulburn, Fonterra and the banks just 18 months earlier and invested accordingly who are the most vulnerable.
We stand to lose the innovators, the future leaders of our industry. They are also those who were in line to buy the properties of retiring farmers.
I am not a Murray Goulburn supplier but the opening price announcement left me reeling. The phone rang. In a daze I answered it but found I simply could not speak.
Words fail me and with Fonterra yet to announce the price it will pay us for our own milk, the sword of Damocles hangs low. Fonterra’s behaviour over the last few weeks has been inconceivable. Will it be able to rebuild any trust tomorrow?