Murray Goulburn slashes milk prices under revised trading outlook

Australia’s largest dairy cooperative Murray Goulburn (MG) has reviewed the expected performance of the business for the balance of FY16 and is dropping its farmgate milk price (FMP) by slightly more than 10%.

MG said that the figure of A$5.602 ($4.273) per kilogram milk solids (kgms) provided on February 29, 2016 is not achievable, and prices will now be between A$4.75 ($3.62) and AU$5.00 ($3.81) per kgms.The cooperative said that this is partially a result of the Australian dollar to US dollar exchange rate, lower than expected demand for exports, and low commodity prices.MG said it now expects its FY16 Distributable Milk Pool (DMP) to be approximately A$170m ($130m) to A$220m ($168m) lower than previously forecast.Prices paid will be higherMG, however, announced that it is creating a milk supply support package, to provide a milk support payment above the actual FY16 FMP, so that suppliers will receive the cash equivalent of A$5.47 ($4.17)per kgms in FY16.This will result in additional borrowing at the end of FY16 of approximately A$95m ($72.5m) to A$165m ($126m).MG said that it “has headroom within its existing funding arrangements, and this initiative is not expected to impact MG’s planned capital investments”.Trading haltOn April 22, MG asked for a trading halt for its MG Unit Trust on the ASX.When trading resumed Wednesday morning, the value of shares dropped from A$2.14 ($1.63) to A$1.40 ($1.07), before closing at A$1.27 ($0.97). Thursday it reached a low of A$1.22 ($0.93) before making a slight recovery to close on A$1.30 ($0.99).

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