Collapse of Sydney milk processor sees dairy farmer quit industry

A dairy farmer from the New South Wales South Coast has quit the industry following the collapse of a milk processor that he says owes him tens of thousands of dollars.

Creditors voted to wind up Country Valley, located in Picton in Sydney’s south-west, and liquidate the company’s remaining assets last week after it was placed under voluntary administration earlier this year.

In a report to creditors obtained by the ABC, insolvency firm Worrells found the company was insolvent as it had insufficient assets to repay its debts.

The report found for the year ending in April, Country Valley recorded a net loss of more than $600,000.

According to the report, unsecured creditors are owed more than $1 million and secured creditors more than $2 million.

The report revealed that liquidators expected to recover less than $300,000 through the sale of assets, including two luxury vehicles and some milking equipment.

Farmers owed $600,000

Jamberoo Valley dairy farmer Steven Downes sold milk to the Picton processor for two years before becoming concerned about irregular payments in February.

“[Invoice payments] were not quite in full. Instead of weekly it was fortnightly,” he said.

Mr Downes said eventually, the payments stopped, leaving him short an estimated $50,000.

In April 2023, Country Valley co-owner John Fairley announced the closure of the business on Facebook, citing health and personal reasons.

Mr Downes said he was one of five Jamberoo Valley dairy farmers missing an estimated total of over $600,000 in unpaid invoices.

“This situation has left us short, to say the least, of cash up front,” he said.

The fourth-generation dairy farmer said the experience forced him to stop milking and leave the industry.

Phil Ryan from the NSW Farmers Association said the collapse of Country Valley was not an isolated case, and more needed to be done to protect farmers.

“This is the fourth smaller processor to close in NSW in the last few years,” he said.

“We certainly need to be protecting farmers in that situation and ensuring they can continue their business.”

Mr Ryan said the current legislation was putting farmers at a disadvantage when a processor collapsed, and that needed to change.

“Perhaps looking at some legislative change that treats milk suppliers as secured creditors, for example, better coverage for smaller processors under the dairy code of conduct administered by the ACCC,” he said.

“Whatever government assistance might be put in place to prevent this sort of event having the same sort of catastrophic effect on these farmers’ cashflow.”

‘Potential’ insolvent trading claim in report

Liquidator Aaron Lucan is tasked with retrieving money owed to creditors and further investigating Country Valley’s finances.

The creditors’ report lodged with the Australian Securities and Investments Commission (ASIC) by the company’s administrators indicated Country Valley became insolvent from “at least” late February 2023.

The report said the administrators had identified a “potential insolvent trading” claim of between $506,899 and $706,747, but it would cost creditors at least $50,000 in legal fees to lodge the claim.

However, the report also identified a potential defence available to any claim, on the basis that the directors may have had reasonable grounds to presume the company was solvent.

The report also stated that Fairley’s son, Thomas Fairley, was operating as a sole trader and owed Country Valley nearly $1 million for products he had purchased.

“In my opinion, it was not in the company’s interest to continue trading with their son in circumstances where it should have been obvious to them that he would not be able to repay that debt,” Mr Lucan said in the report.

Mr Lucan said ASIC advised him “that it does not intend to conduct further investigations” about the matter.

More protections needed: MP

Kiama MP Gareth Ward asked the NSW government earlier this year if it would intervene to cover the losses incurred by dairy farmers if the funds were irrecoverable.

Agriculture and Regional Affairs Minister Tara Moriarty said there were no NSW government programs providing financial assistance to farmers suffering hardship due to not being paid for their produce.

The minister encouraged farmers to work with their rural financial counsellor “to understand their options”.

Mr Ward said neglecting struggling farmers could have a serious impact.

“If the minister continues to fail farmers, we’ll be propping up overseas primary producers and not backing in our local farmers,” he said.

“We don’t just lose local farmers and farm jobs, we lose local produce.”

Country Valley has been contacted for comment.