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Unpopular dairy scheme under review

AAP logoAAP 5/09/2016 Trevor Chappell

Milk processor Murray Goulburn is reviewing its controversial support package for dairy farmers after admitting the program has disappointed its suppliers and is testing their loyalty.

Murray Goulburn chairman Phillip Tracy released a a letter to Murray Goulburn supplier-shareholders on Monday acknowledging the problems in the Milk Supply Support Package (MSSP) that was designed to claw back loans made to farmers after a shock cut to farm gate milk prices in April.

"Since its introduction it has become very clear that the MSSP is not considered by suppliers to have addressed their most significant concerns and is potentially proving counterproductive from the perspective of their continued loyalty," Mr Tracy writes in the letter.

"This was not its intent, and the board is very mindful of continuing to do what it can to help address supplier concerns."

"The board and management are therefore actively reviewing all options with a view to providing a better solution to support suppliers in the long-term interests of suppliers and MG."

Murray Goulburn introduced the MSSP - essentially a loan package for farmers - after it shocked the dairy industry in April with a surprise cut to the price it pays farmers for milk.

Murray Goulburn tried to soften the blow by introducing the MSSP to add some extra money to the lowered farmgate price.

But that support and the cost of funding, including interest, it was to be recovered by Murray Goulburn by docking suppliers' future milk payments for up to three years.

Murray Goulburn said on Monday that the MSSP had allowed the co-operative to pay its suppliers an average farmgate milk price of $5.53 per kilogram of milk solids for 2016 rather than the final farmgate milk price of $4.80.

Murray Goulburn's interim chief executive, David Mallinson, said at the release of Murray Gouburn's annual results in August that the co-operative had to regain the confidence of suppliers.

Mr Mallinson said two to three per cent of dairy farmers generally switch processors at the end of each season but this year the figure was about seven per cent.

"I think it's (because of) two parts: the absolute milk price and probably a lack of trust," he said.

The Murray Goulburn board expects to say more on the matter by the end of October.

Units in Murray Goulburn's listed entity, the MG Unit Trust, were five cents lower at $1.31 at 1144 AEST.

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