Embattled Oz co-op bleeds milk

Suppliers have either moved to other processors or retired; the loss is within an expected range.

Answering questions from aggrieved suppliers during a round of farmer meetings, the co-op admitted milk loss in recent weeks.

"We will continue to monitor the supply situation over the coming weeks," Murray Gouburn says. "While it is always sad to see suppliers leave the co-op, it is ultimately a matter for those suppliers and we understand and respect that."

In April, MG issued a profit warning after being caught out by a global decline in milk prices over the previous year and was unable to meet the dividend payouts it had promised to its investors.

To try to shore up profits it made a retrospective cut in payments to its suppliers from A$5.60/kgMS to below A$5. This applied to the previous 10 months payments and will be clawed back over three years. Suppliers have been left with a large hole in their finances which many are unable to fill.

The co-op denies offering incentives for farmers to leave the co-op, saying media reports were false.

The same applies to any suppliers wishing to join the cooperative, it says.

"Only standard terms and conditions are being offered. For example, some suppliers have joined MG in recent months. These suppliers were required to join for a term of supply but otherwise joined the coop on standard arrangements."

It also denied offering preferential deals to larger suppliers. MG says its standard payment system applies to all suppliers.

"MG is regularly required to consider applications under these terms or variations for suppliers including our very smallest to largest volume suppliers," it says.

"We do this in accordance with internal procedures and always aim to support the supplier and add benefit to the overall cooperative."

Call for a square off

Some Murray Goulburn shareholders want an extraordinary meeting to discuss the co-op's plight.

MG says it knows this but "to date we have not had any notice requesting this on behalf of suppliers".

"Calling a general meeting is a fundamental right of all shareholders. Under MG's constitution and in line with the Corporations Act, shareholders with at least 5% of the votes that may be cast at the general meeting may request the company to hold a general meeting."