Action should clear the air

April 29, 2017

Perhaps it was coincidental, but the news that the ACCC will press charges against dairy co-operative Murray Goulburn in the Federal Court has emerged exactly 12 months after the price cuts were announced.

Some farmer-suppliers and industry activists have been urging the commission to take a closer look at the processor following the shock announcements last year which led to not only price cuts, but a clawback requiring suppliers to back-pay their company.

One year ago, former managing director Gary Helou announced that the expected price of $5.60/kg milk solids promised in February was no longer achievable.

Management blamed the changes in the exchange rate and poor performance of segments of product sales due to low commodity prices.

The announcement was met with shock and dismay by suppliers (and not just a few in the broader community who appreciate the flow-on of farm-gate milk prices), many of whom had completed budgets for the approaching year based on a more optimistic price.

Suppliers who had been monitoring international prices were anticipating a depressed price in the approaching year, but not many expected a price cut for the remainder of the current year.

A key issue that arose in the subsequent debate about the announcement was about expectations and the indications given by the company in the months leading up to the cut.

Mr Helou and the board has already faced serious criticism over the timing. Mr Helou has departed the company and the board has apologised for the impact on supplier businesses.

Given the extensive debate over what happened and the serious impacts on the incomes for many suppliers, current and former Murray Goulburn suppliers, fatigued by the conditions of the past year and struggling to make sense of their predicament, may be pleased to see the circumstances examined by an independent authority.

The News notes no pecuniary penalty is being sought by the ACCC of Murray Goulburn, and the cruel irony is that the costs of the action will have to be borne by the company, and hence the suppliers and shareholders.

But the company and industry deserves some clarity over what happened so that the air can be cleared and the new company chief executive officer and chair can get on with the job and start rebuilding a company which has played a key role in developing Victoria’s successful dairy industry.

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