Jamberoo dairy farmers who put their faith in a Picton milk processor to prepare and market their milk are unlikely to receive more than 15 cents in the dollar on their debts to the business, after the company went bust, and could walk away with nothing.
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A creditors report lodged with corporate regulator ASIC shows that Country Valley was wound up as it was nearly half a million dollars in the red.
Financial records show that as recently as June 2022, the company was solvent, albeit had incurred significant liabilities from the previous year.
Furthermore, much of the company's nominal assets were related party loans, auditors point out.
"The company's accounts overstate the company's ability to meet its current liabilities."
Country Valley announced in April that time was up for the business. In a Facebook post, the company said health issues had impacted owner John Fairley while extreme wet weather last year had impacted quality.
The company had previously experienced quality issues in 2020, which had re-emerged, along with a 40 per cent decline in the business's trade.
In 2022, Country Valley launched the Jamberoo Valley Milk brand, targeted at cafes and local supermarkets in the Illawarra, promising local, fresh milk, albeit at a slightly higher price point.
Farmers told The Mercury that the brand was launched without their knowledge and that they didn't see prices for their milk improve, even as it was being sold at higher prices to the customer.
While the product was reportedly selling well, this did little to shore up the business, with the creditors report stating that the company was trading while insolvent from "at least" February 2023.
This places the directors of the business, John and Sally Fairley, at risk of civil penalties and criminal charges.
This risk is amplified by the company loaning the son of the directors, Thomas Fairley, with nearly a million dollars worth of milk.
The son operated as a sole trader in Canberra and the company also made direct loans to him totalling $195,324.66.
The report outlines that Thomas Fairley is also in financial strife, with a net asset deficit of $925,257.
"As a result, in the event the Company is wound up, the costs of pursuing this debtor would likely outweigh the benefit of any recoveries," the report states. "No recovery is expected from this source."
The administrators' report proposes selling the company and its assets, which would net an estimated $569,239 in return. This would allow employees and secured creditors to be paid out, with the remaining funds distributed to unsecured creditors such as suppliers.
Were the company to be liquidated, suppliers would likely receive nothing.
A meeting will be held on Tuesday to decide on the course of action.
The collapse of Country Valley comes as the NSW Farmers association warns that dairy farmers are being forced out of the industry, as costs increases and prices are squeezed.
"We've got this horrible situation where the supply is shrinking and rather than prices that support farmers we've got signs the processors will drop their prices, which will lead to less Australian milk in supermarkets," NSW Farmers dairy committee acting chair Malcolm Holm said.
Bulla has told farmers it would pay $8.80 to $9.60 per kilogram of milk solids, below what farmers say is a sustainable price.
"It's a tough situation for farmers and families at the moment - we don't want to see the price of milk rise in the supermarkets, but at the same time we don't want to be driven out of business," Mr Holm said.
"There are a lot of costs in the supply chain that are contributing to milk prices, and we're getting squeezed on either end."
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