Dairy farmer crisis ‘diabolical’: Norco chief
NORCO co-op chief executive Brett Kelly has branded the suffering of dairy farmers at the hands of international milk giants Fonterra and Murray Goulburn as diabolical.
His comments come after it was revealed that both Fonterra and Murray Goulburn have slashed payments for their mostly Victorian-based producers.
The companies have reduced the price per kilo of milk solids from $5.60 per kilo to about $4.75 per kilo. The changes are retrospective, meaning the average farmer will be forced to pay back about $120,000 on their yearly earnings.
Fonterra boss Theo Spierings issued a statement yesterday confirming the company had drastically cut farm returns for its producers due to an "extremely low milk price environment" but Mr Kelly slammed the move.
"We're all very concerned for the farmers, what's happening there is diabolical," Mr Kelly said.
"The farmers go out and do their budgeting based on what they're going to be paid, they work seven days a week, they have children to feed and they don't get a lot of money.
"To be told that the price has changed or that they now have to pay some back is a very disappointing situation."
While Fonterra and Murray Goulburn producers are reeling from the price cuts, Mr Kelly said Norco-aligned producers are shielded from commodity price fluctuations.
The Lismore-based company exports only 5% of its supply - fresh milk achieving a premium price in China and ice cream selling in Japan - while 95% of its supply serves domestic markets.
Mr Kelly said Norco guaranteed payment and pick-up for their farmers.
"If you go out there in the market place without the supplier locked in first, you put the whole business at risk," he said.
"If the business doesn't come, you financially bleed to death because you have no profitability."
Mr Kelly said Norco offered dairy farmers, on average, the highest price at the gate in Australia and because it was not shareholder-driven did not view gate price as a loss.
"Our farmers live by the farm gate price," he said.
"Our principal is that farmers can invest in their farms and we have a long-term, sustainable business."
MILK CRISIS FACTS:
Murray Goulburn made a profit forecast of $39m-$42m, while its prospectus forecast was $89m.
Fonterra slashed prices it pays to Australian farmers to improve profitability.
Cuts mean farmers will be paid about $4.75 per kilo of milk solids, down from $5.60.
This equates to 37c-litre for the milk which costs them about 38c-litre to produce.
The changes are retrospective, meaning farmers will have to pay back the difference for the year.
The average each farmer owes Fonterra and Murray Goulburn is $120,000.