Saputo and Murray Goulburn – a big chance for reform
Canadian dairy processor Saputo Inc has a unique opportunity in Australia to play a pivotal role in reforming the national dairy industry following its pending takeover of the big processor Murray Goulburn Cooperative Limited.
This was the opinion of advocacy group Dairy Connect CEO Shaughn Morgan today as he reflected on the need for change particularly in introducing transparency and fairness to contracts between farmers and processors.
“Saputo Australia will have a valuable opportunity to create a new benchmark governing the format and fairness of supply contracts between dairy farmers and processors,” he said.
“Contract transparency is critical as well as ensuring that prices are clear and precise, with a clearly-understood price setting mechanism.
“We also need to remove the current provision in short form contracts allowing processors to arbitrarily scrap contracted prices paid and to claw back a proportion of past payments.”
Shaughn Morgan said reforming its pro-forma contracts would be a valuable lever in attracting back milk suppliers who began abandoning Murray Goulburn following supplier price cuts in 2016.
“Analysts have predicted Saputo will have to work hard to win the faith of prospective fresh milk suppliers who will be closely watching and assessing the culture of the new enterprise,” he said.
“Any reforms introduced highlighting fairness and transparency will no doubt make their way through the industry nationally in the fullness of time.”
Shaughn Morgan said that the new contracts between farmers and processors must allow the producer to supply milk to other processors.
Murray Goulburn shareholders recently overwhelmingly approved the $1.3 billion sale of the cooperative to Canadian dairy giant Saputo amid some sadness over Murray Goulburn’s demise.
More than 98 per cent of proxies voted in favour of the sale at the shareholders’ meeting in Melbourne early this month.
Murray Goulburn shareholders, who have been extensively briefed on the sale since it was announced in October 2017, appeared resigned to the sale, asking no questions on the resolution.