The decision by Murray Goulburn to slash milk payments to farmers has been condemned by dairy industry leaders, with the head of Bega Cheese saying it had eroded trust and damaged the wider dairy industry.
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Murray Goulburn, the nation's biggest dairy processor with about 2600 farmer suppliers, was fiercely criticised at an industry breakfast in Melbourne on Friday.
Participating in a panel discussion with three other industry leaders, Bega Cheese executive chairman Barry Irvin said: "The damage to the industry goes across the industry."
He blasted Murray Goulburn as he sat just three seats away from its chairman, Philip Tracy, saying Murray Goulburn would produce its "highest profit since the GFC" in 2015-16.
"That doesn't feel fair," Mr Irvin said.
He said Murray Goulburn's milk payment cuts and associated support packages would deliver a financial blow to farmers of about $200 million.
But while farmers faced this financial pain, Murray Goulburn would produce a profit of about $40 million for 2015-16, he said.
Mr Irvin said Bega Cheese had not dropped milk payments. "Why did we not drop? Because it was the wrong thing to do," he said.
"I had a phone call yesterday from a 26-year MG supplier, who burst into tears while she was begging me for Tatura Milk Industries, our subsidiary, to take her milk," he said.
When he finished speaking, Mr Irvin was applauded by many in the room.
Panel member David Basham, from Australian Dairy Farmers, said farmers had been treated unfairly by price cuts.
"These really late decisions hurt really hard, and we need to make sure that they don't happen again," Mr Basham said.
New Zealand's Fonterra, the world's biggest dairy exporter, announced a sharp price cut just a week after Murray Goulburn. The cuts came with just two months remaining of the 2015-16 season, and threaten to plunge many farmers into a loss-making position because they lower the average price paid for the entire season.
Mr Tracy said Mr Irvin was entitled to his views, but strongly defended Murray Goulburn, which had made "very clear" public announcements this year about the risks to the dairy market.
"We all know that there are factors that are beyond our control that can move against you very quickly," he said, referring to currency movements and falling demand for adult milk powder in China, that hurt Murray Goulburn.
"Obviously our public statements are out there and we stand by those. We are very disappointed by our actions and how they've turned out, but we can only call it as we see it," he said.
Mr Tracy also rejected Mr Irvin's criticisms of Murray Goulburn's expected profit, and its support package for farmers. Murray Goulburn has in effect deemed that it has overpaid farmers for most of 2015-16, and the package is a way of recovering the so-called overpayments over future years.
Of Murray Goulburn's projected profit Mr Tracy said: "We must remember that roughly two-thirds of that pool is paid out in dividends to shareholders, which are farmers, and one-third goes to unit holders."
After the breakfast, Mr Tracy said Murray Goulburn would announce its milk payment level for the start of next season in about three weeks.
