The plant closures will cost 360 people their jobs. Credit:Jessica Shapiro In a day of mixed fortunes for rural communities, Murray Goulburn also said it would write off debts owed to it by farmers under its controversial Milk Supply Support Package. Murray Goulburn set up the scheme early last year after it drastically and retrospectively cut its farm gate milk prices, throwing farmers who had budgeted on the higher price Murray Goulburn promised into financial turmoil. Farmers were due to start making repayments in July, but all debts would be wiped, the company said. Any farmers who had made repayments between July and September last year would be refunded. United Dairyfarmers of Victoria president Adam Jenkins said the decision was a "huge step forward in rebuilding trust and confidence" between farmers and Murray Goulburn, which could even entice some out of the droves who stopped supplying the company to return.

"Even the language in the communication that's come out of MG today is putting the farmer first," he said. Mr Jenkins said the next step in restoring trust would be if Murray Goulburn can offer a competitive milk price next season. Murray Goulburn suppliers, who are also shareholders under the co-operative model, will be hit with a cut to farm gate prices this season, with the company lowering its forecast from $4.70 a kilogram to $4.60 on Tuesday because of "weaker trading conditions". But Murray Goulburn said it remained committed to paying an average of $4.95 a kilogram this financial year. To fund that price, the company said it would suspend dividend payments to shareholders immediately and deviate from its "profit-sharing mechanism", which allocates dividend payments to shareholders based on farm gate milk prices.

Murray Goulburn's sweetener to farmers comes after the Australian Competition and Consumer Commission last week launched court action against the co-operative and its former managing director Gary Helou and former chief financial officer Bradley Hingle, alleging they misled farmers on what milk prices to expect in 2015 and 2016. Murray Goulburn's chief executive officer Ari Mervis, who has been in the role for less than three months, said its decision to wipe its suppliers' debts was not influenced by the court action. The ACCC is not seeking a pecuniary penalty against the company, because that would ultimately hurt its farmer owners. Mr Mervis acknowledged that last year's debt arrangement had an "enormously adverse effect" on farmers' finances and the relationship between them and the company. The initial feedback from Tuesday's announcement had been positive, he said. "The journey to enhancing trust, respect and confidence is always a long one – it's an easy one to slide off but it's a long one to rebuild," he said. "It's not something that's commanded and it's certainly not built overnight." Shares in MG Unit Trust, which was floated on the ASX in 2015 as a way for non-farmers to invest in Murray Goulburn, fell 14 per cent to 92.5¢ after investors learnt dividends would not be paid.

The funding vehicle floated at $2.10 a share but crashed during last year's milk crisis and has not recovered. Mr Mervis said it was in shareholders' interests for Murray Goulburn to be in a strong financial position. "These were difficult decisions but they were decisions that needed to be taken," he said. Loading Deputy Prime Minister and Nationals leader Barnaby Joyce said he was happy that farmers would be getting more money.

"What it puts up in big flashing lights is that the previous management of Murray Goulburn did some pretty ordinary things, and the ramifications of it have been widespread," he told the ABC.