Australian dairy co-op Murray Goulburn (MG) recently announced that it has paid its 2,500 supplier farmers too much for milk over the past 10 months.
It has been estimated that this overpayment is in the region of €125m and the co-op has said that suppliers will have to pay this back.
MG said that it will manage this via adjustments to the milk payments over the next three years by introducing a Milk Supply Support Package (MSSP).
The co-op had continued to hold its milk price up, despite the challenging global prices ahead of the overpayment announcement.
Four members of the board of MG have resigned following the revelations, including Managing Director, Gary Helou and Chief Financial Officer, Brad Hingle.
In the aftermath of the MG announcement, Fonterra Australia, which had previously forecast a milk price of $3.90/kgms (19.30c/L) was forced to match MG’s price of $5.60/kgms (27.69c/L) which AHDB Dairy has said was to satisfy benchmark obligations.
Fonterra Australia is now offering loans to its milk suppliers in order to bump up the price they’re being paid for milk.
It has also emerged that the regulator Australian Securities and Investments Commission are now investigating MG following the milk price cut.
MG has been given formal notice to produce documents and emails regarding last month’s cuts and its March 2015 product disclosure statement by the regulator.
Farming organisations in Australia are angry at the cuts and the United Dairyfarmers of Victoria (UDF) is calling on processors to end the pricing uncertainty they’ve created for dairy farmers.
UDV President Adam Jenkins said that not only have Murray Goulburn and Fonterra cut milk prices, they’re clawing back what they’ve already paid to farmers, backdated to the start of the season (July 1, 2015).
“The UDV wants MG and Fonterra to review and ultimately remove these claw-back clauses from their supply contracts, so we never see a repeat of what’s happened this season.
“Why should dairy farmers pay for the poor management decisions of these dairy processors?”