DAIRY farmers are considering taking legal action against milk processors in the wake of recent price drops that will cost the average farmer $130,000 over the next three years.
South Gippsland farm consultant John Mulvany said many in the dairying community were assuming demands by milk processors Murray Goulburn and Fonterra to pay back loans over the next few years were legal.
“Putting aside class actions and the like, there are individuals seeking expert legal opinion to assess the legality of what has occurred,” he said.
Law firm Slater and Gordon is investigating a potential class action on behalf of all current and former investors who acquired units in Murray Goulburn’s listed entity MG Unit Trust before April 27, 2016.
The claim relates to guidance provided by Murray Goulburn in its Product Disclosure Statement (PDS) issued on July 2, 2015, regarding its likely revenue and profits from the sale of milk products during the current financial year.
In its PDS, Murray Goulburn provided a forecast to its shareholders and unit holders of a financial year net profit, after tax, of $85.8 million.
On February 29, 2016, Murray Goulburn announced a revised net profit after tax forecast of approximately $63 million, citing historically weak dairy commodity prices.
Slater and Gordon senior class action lawyer Tim Finney said the firm would investigate whether Murray Goulburn misled the market.
“Our initial investigations have identified inconsistencies between Murray Goulburn’s statements to the market regarding its likely profits in the 2016 financial year and the factors that would affect its performance,” he said.
“We are investigating whether the true cause of Murray Goulburn’s downgrade was an aggressively optimistic profit forecast…which the company was simply never going to achieve.”
The talk of legal action came as dairy farmers sell cows for slaughter, with the Victorian Livestock Exchange Leongatha yards selling more dairy cows than usual at last Wednesday’s prime market, with dairy cows comprising half of the sale of just over 2000 head.
VLE chief executive officer Wayne Osbourne said the saleyards typically receive a flush of cows at this time of year, so the influx may not have been due to milk prices tumbling.
“It may have been too soon and farmers may have still been coming to terms with the news, but on the other hand dairy farmers could as just easily been being proactive,” he said.
Of the dairy cows yarded last Wednesday, 707 were Friesian, 194 were Friesian cross, 58 were Jersey and 51 were Jersey cross.
Mr Osbourne said over the past three financial years, the average weekly number of cows yarded had been 558.
For the period of March, April and so far into May, the average weekly number of cows has been 986. The same period last year was 602 cows per week.
“The drivers for this? Up until the MG announcement the drivers had been tough seasonal conditions combined with good prices for cows,” Mr Osbourne said.
“However, going forward you’d have to say that the milk price coupled with seasonal conditions are going to be the primary drivers.”
Mr Mulvany said Murray Goulburn and Fonterra had damaged confidence in the industry, lowering relationships between farmers and processors to levels not seen since the mid 1970s.
“We now have a situation of complete distrust, a lack of confidence, in addition to the obvious financial impacts to dairy farmers,” he said.
“All the individuals who had the responsibility of the governance of these organisations must stand to account.”
Mr Mulvany said farmers were being treated with “absolute disrespect and are the fall guys in either mismanagement or market volatility, or both”.
“Dairy farmers are like other self employed people. They like to go about their business and they don’t have time to defend their position,” he said.
Mr Mulvany said the concept of opening price, which has been in place for 20 to 30 years, was now completely insecure and almost meaningless because of the major price drops farmers have experienced.
“Clearly, recent events mean that if a milk processor gets their budget a bit wrong, they can come back and knock on the door of the farmers, and say ‘Oops, we need to reclaim some money’,” he said.
United Dairyfarmers of Victoria president Adam Jenkins said farmers he had spoken to were gutted, disappointed and angry, and many were calling for more accountability at board level.
“There is no doubt this will put pressure on the industry and we will see some fall out and reduced milk flows,” he said.
“The market is very volatile and we welcome the efforts of Warrnambool Cheese and Butter, Burra Foods, Bega Supply Company and other processors who have held their commitment to their suppliers until the end of the season.”
Mr Jenkins said people needed to look after themselves, their families and their communities.
“Farmers need to be clinical about their business and seek professional financial advice,” he said.
“We are encouraging farmers to be aware of sessions that will be held by the VFF/UDV, Dairy Australia and other organisations offering support.”
UDV is calling for early price and market estimations, which will allow farmers to budget.
“No indication in next season’s opening price leaves people anxious and unable to plan their next steps,” Mr Jenkins said.
Legal action taken
THE trustee of a super fund is taking Murray Goulburn to the Supreme Court of Victoria.
John Webster, trustee of Elcar Pty Ltd Super Fund Trust, is being represented by Mark Elliott of Elliott Legal.
The trustee is a unit holder in the MG Unit Trust and paid $2.10 for 18,000 units – a total of $37,800.
Among the allegations made, the trustee alleges MG knew its sales targets and/or revenue were unlikely to be achieved, and would not have bought units or bought units at a lower price had that information been disclosed.
Mr Elliott lodged the statement of claim with the court yesterday (Monday).
Fonterra responds to
farmers’ outcries
FONTERRA Australia last Friday announced additional support for its autumn calving suppliers, following its revision of its season 2015-16 farmgate milk price.
The company said these measures autumn calving structure were disproportionately affected by the farmgate price reduction.
Fonterra Oceania managing director Judith Swales said the company had spoken with many farmers and have heard their concerns regarding the impact on autumn calving.
“Although the reduction in the farmgate milk price affects all farmers, we recognise it has a greater impact on suppliers with autumn calving herds given the reduction has had to happen late in the season and we need something that is fair across all our farmers,” she said.
Fonterra will provide an additional autumn offset to farmers for milk supplied in May and June 2016.
The offset will provide autumn calving suppliers an additional $2.50 a kilogram of milk solids in July and August payments based on the milk solids a farmer supplies in May and June 2016.
This will effectively be drawn through the redistribution of base rates in the 2016-17 season.
“We know the events of the last few weeks are incredibly tough on dairy farmers. We are listening and we know that changes need to be made. Our priority is to support all our farmers, act fairly, and continue to operate responsibly and transparently so that we have a sustainable Australian dairy industry,” Ms Swales said.
MG comfortable
with decisions
MURRAY Goulburn’s board remains “very comfortable” with the decisions it made that led to the milk price tumbling, despite being investigated by the Australian Securities and Investments Commission (ASIC) for possible false and misleading conduct.
MG media contact Nicole Devlin said, “As is common in these types of matters, ASIC has contacted us and we are assisting in relation to their inquiries and providing information regarding our continuous disclosure obligations regarding information notified to ASX from 29 February, 2016.
“The board has confirmed that they are very comfortable with the decisions they made. Naturally, in the circumstances the board has reflected on the process that led to the recent announcements and their view is that there is nothing they could have done sooner or differently.”
ASIC was not able to comment.
More MG directors resign
THREE Murray Goulburn directors have resigned from the board since the cooperative announced a significant drop in milk prices.
Max Jelbart of Leongatha South resigned due to ill health. Then special director Kiera Grant quit, despite only joining the board in March this year.
Western region supplier director Duncan Morris also resigned, paving the way for two vacancies for supplier directors to be nominated by the company’s western region supplier-shareholders as part of the annual regional director elections to be held in coming months.
Western region supplier director John Pye will complete the maximum term as a director and not restand for re-election this year.
Chairman Phil Tracy regretted the losses.
“The board has a lot of work to do to win back the support and confidence of our supplier/shareholders and in the interim is understandably working in a difficult stakeholder environment,” he said.
Income support
open to farmers
FARMERS are being urged to explore the possibility of obtaining income support in the wake of the dairy industry shake up and tough season in South and West Gippsland.
Executive officer of the Rural Financial Counselling Service in Gippsland, Peter Jennings, said, “Farm Household Allowance is a government assistance program offering income support of up to $476 per fortnight each for a farming couple who are experiencing financial hardship. Single people may get up to $527 per fortnight.”
To be eligible, farmers will need to:
contribute a significant part of their labour and capital to the farm enterprise;
meet an income and assets test, noting a new Minister’s Rule has been signed allowing certain assets (relevantly including shares in Murray Goulburn Cooperative Co. Limited) to be excluded from the FHA assets test; and
be willing to enter into a Financial Improvement Agreement to help them improve their financial circumstances.
To find out more, farmers should call the Department of Human Services (Centrelink) on 132 316 or visit the DHS (Centrelink) website: www.humanservices.gov.au/customer/services/centrelink/farm-household-allowance
Mr Jennings said the Rural Financial Counselling Service in Gippsland has rural financial counsellors able to help with the FHA application process, as well as offer assistance with budgets, cash flow management, financial analysis, identifying areas of risk in their business, and exploring short and longer term options.
The Rural Financial Counselling Service is co-funded by the Australian and Victorian governments and can be contacted at Leongatha on 5662 2566.
“If farmers are feeling the effects of stress they can contact their GP and request an urgent appointment. The GP will advise them on appropriate strategies, treatment or referrals,” Mr Jennings said.
Farmer
flies flag
MARDAN dairy farmer Tanya Privitera has raised the public’s awareness of the need to buy products made by Murray Goulburn.
Her social media campaign, using the hashtag #Dairyincrisis, has attracted widespread interest and resulted in interviews in Dairy News Australia and publicity on television show, The Project, which will screen a segment about the dairy industry tomorrow (Wednesday) night.
Mrs Privitera’s efforts have inspired shoppers to buy more of Murray Goulburn’s Devondale branded products at supermarkets than usual.
ACCC steps up probe
THE Australian Competition and Consumer Commission (ACCC) is making preliminary enquiries into the price cuts announced by Murray Goulburn and Fonterra.
ACCC chairman Rod Sims said the commission had been taking information from stakeholders and had “escalated the matters for investigation”, including “more detailed information gathering”.
“While linked to contractual arrangements, the ACCC is interested in the timing and notice of the cuts, the period in which farmers have been given to consider their options and all of this against the backdrop of supply arrangements that place a lot of risk on farmers,” Mr Sims said.
“The ACCC will consider whether the changes have involved misleading conduct or whether there are elements of unconscionable conduct.
“These will not be straight forward enquiries or assessments and it is not clear that there will be matters we can take forward. This said, they clearly warrant consideration and given the strong public interest we consider it appropriate to confirm our investigation.
“Noting the pressures placed on farmers, the ACCC will be progressing this matter in a timely manner, but we will need some time to get the facts and consider the issues in the context of the provisions of our law.”
Government urged
to back dairy
LABOR candidate for McMillan Chris Buckingham said a Labor Government would work with farmers to find a way through the challenges of the current dairy climate.
“Thousands of Gippsland families are really hurting and the silence from Barnaby Joyce, our current Deputy Prime Minister and the Agriculture Minister, is deafening,” he said.
“We may be in the middle of a federal election, but this is an issue that should be a priority for all parties. We have a $3 billion industry on its knees and we cannot afford to delay action any further.”
Mr Buckingham said “the people responsible for this disaster need to be held to account” and said the Federal Government needs to support the Victorian Government.