WHY is Murray Goulburn Co-op rewarding the inefficient, asks TIM KOOLOOS
Some comments on Robert Poole's broad-brush statement in "Payment plan not for all seasons" (WT, January 2) illustrate the disconnect between farmers trying to produce as much milk as efficiently as possible, and their factory hell-bent on using what is already under-utilised processing capacity as evenly as possible through the year.
This is particularly so when, in Gippsland - an area dominated by dryland farming - Murray Goulburn appears to have had a massive decline in the share of milk supplied to its factories directly from the farm gate.
The average Gippsland farmer is still "seasonal calving", or calving at a time to suit grass growth in line with cow requirements, producing less than two million litres of milk each. But they account for about 60 per cent of Gippsland's milk as a collective.
Why then would Murray Goulburn firstly implement a pricing system that supports a loud, but smaller, group of inefficient, larger farmers with a flat supply curve, when the majority of those suppliers in Gippsland had left the co-op 10 years ago?
Then, to compound the increased cost of production to satisfy a flat milk supply curve, encourage a higher cost of production with incentives. These incentives increase cost of production at the farm gate and, combined with shareholder dividends, the disparity between the highest and lowest-paid milk supplier, which in Murray Goulburn's case can be as much as 30 per cent.
Suppliers last year received about 40c a litre, equivalent to half of Murray Goulburn's revenue. Ten years ago they got 75 per cent of the revenue.
I cannot see how a pricing system that increases the cost of farm production compounded by a seemingly increased cost of processing - both of which appear to be worn by the farmer - is an effective payment system worth defending on the basis of an "empty" yet supposedly "efficient month-on-month" factory infrastructure.
Sadly, other processors are only doing "just enough" different to Murray Goulburn to gain supply to fill their factories, which is not much.
I believe this is a huge issue in the dairy industry and is one of the main reasons why Murray Goulburn is on a downwards spiral in terms of the number of farmers supplying it.
- Tim Kooloos is a Leongatha South dairy farmer.