The recent closure of the Murray Goulburn dairy plant in Rochester has been a devastating blow for the small community. For 40 years the plant was the largest employer in the area, with 105 workers.
Along with this closure Murray Goulburn closed two other sites, Kiewa in Victoria and Edith Creek in Tasmania, totalling 360 jobs lost. The reason for the closures is rooted in both the global downturn of milk prices and the company’s own policy of punishing dairy farmers for plummeting prices.
Early 2014 saw a slump in global dairy prices, which continue to fall. In response Murray Goulburn looked at ways of maintaining their significant profits and keeping the major supermarket chains happy. In 2016 they announced cuts to the price they would pay to farmers for ‘farm gate’ milk.
As if the price cut itself wasn’t enough, they also backdated it for the whole of the financial year, meaning that thousands of small and medium sized dairy farmers not only faced a reduced price per kilo of milk solids but the challenge of paying back enormous debts.
Many farmers left the industry in droves, which in turn hit Murray Goulburn’s profits as a result of a dwindling milk supply. A year ago they confirmed a loss of $31.9 million dollars in the first half of the 2016-17 financial year as 20% of their milk supply vanished.
In a bid to maintain their profits they have been forced to backtrack on making farmers pay back their so-called debt, and the company is now even offering payments to those who supply them with milk. This includes payments for those who “retired” to return to supply them.
This new scheme reportedly cost $148 million. But Murray-Goulburn has already lost a significant number of suppliers, now down to 2 billion litres of milk compared to 3.5 billion two years ago. Some suppliers have gone over to Fonterra, others have been forced out of the industry. As a result they have now closed these three factories, a decision which has impacted the lives of hundreds of workers and their families significantly.
It is not only Murray Goulburn who have cut the price paid for farm gate milk. Fonterra did the same, which particularly affected dairy farmers in New Zealand where they are based. Other dairy producers domestically and internationally have followed suit. In a classic case of over-production, dairy products were produced for a non-existent market creating a glut in supply as there was not enough demand for the product.
Sadly, it is not the major companies such as Murray Goulburn, Woolworths or Coles that are paying for this, despite the fact that they have all been instrumental in creating this crisis. Despite reporting net after-tax losses, an analysis by The Weekly Times shows that Murray Goulburn recorded a 231% increase in before-tax profits in the first part of this financial year – that’s $35.1 million in profits!
The company is currently in negotiations with Canadian dairy giant Saputo. Saputo hope to buy Murray Goulburn but they have given no indication that they will re-open the closed plants once the deal is ticked off on by the ACCC. Saputo have also not ruled out further plant closures.
The ongoing volatility of the capitalist market means that this plant closure will not be the last. The nature of profit-driven capitalism means that more small farmers will be squeezed at the expense of the big corporations. In addition to sending small farmers to the wall this process facilitates a certain monopolisation of the industry. Bigger players tend to gobble up their competitors.
The fight of small farmers and dairy workers alike must be based on fighting the profit-driven system itself. If the profit motive was removed from the dairy industry we could produce cheap milk while also protecting jobs and the interests of small farmers. This type of approach is crucial if we are to defend small communities like those in Rochester.
Socialists demand that the big milk producers like Murray Goulburn and Fonterra are brought into public ownership, along with the big supermarket chains. On this basis we could produce goods in a planned way based on need rather than the anarchy of the market.
By Denise Dudley