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THE Tasmanian dairy industry is reeling after the state’s largest milk processor, Fonterra, announced a cut to its supplier milk price.

TOUGH YEAR: Dairy cows in North-West Tasmania. Picture: KEITH DIDHAM

THE Tasmanian dairy industry is reeling after the state’s largest milk processor, Fonterra, announced a cut to its supplier milk price — just a week after Murray Goulburn slashed its farmgate price.

The move is a cruel blow to the state’s valuable $440 million industry, leaving 440 dairy farmers with tough decisions to make about their future operations. About 250 farms supply Fonterra.

Speaking at Agfest yesterday — where most dairy producers first heard the news — farmer Leigh Schuuring, from Mella in the dairy heartland of Circular Head, said he would crunch the numbers before making a decision on his future.

“The price drop will hit farmers hard,’’ he said.

“We may even dry off all or most of our cows until next season when calving starts in August, but we will crunch the numbers before making a decision.”

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Dairy is one of Tasmania’s major agricultural sectors, producing almost 900 million litres of milk a year — about 9 per cent of the nation’s production.

Fonterra Australia revised its farmgate price for the full 2015-2016 season from $5.60 a kilo of milk solids to $5/ kgMS. This follows MG — the largest dairy processing co-operative in Australia — dropping from $5.60 to between $4.75 and $5/kgMS.

Dairy farmers have copped a tough year dealing with the extreme dry, making fodder hard to get and causing further increases in the cost of production.

Fonterra’s managing director for Oceania Judith Swales said the price change reflected “the reality of the supply and demand imbalance that is affecting global dairy commodity prices, compounded by the recent strength of the Australian dollar”.

“The reduction in the farmgate milk price is the last thing farmers want to hear — however, it is unlikely to come as a surprise,” Ms Swales said.

“With around 40 per cent of Australia’s milk exported, our ongoing message has been that Australia is not immune to the global dairy challenges, that the milk price did not reflect current reality and that farmers need to budget conservatively.”

DairyTas executive officer Mark Smith said the dairy industry would work with the Tasmanian Farmers and Graziers Association to help.

Fonterra also announced a support loan, which offers up to 60c/kg milk solids, repayable from the 2017-2018 financial year.

MG is offering a milk supply support package of $5.47kg/MS so the drop is not as steep — but it is not a loan: the support payment will be deducted from milk payments over the next three years.

Next Tuesday, farmers will get their chance to find out more about Murray Goulburn’s revised forecast and its lowered farmgate price at a meeting in Smithton.

Among those attending will be chairman Philip Tracy, directors, and interim chief executive David Mallinson.