Dairy needs a balancing act

A “BALANCING” plant to resolve Western Australia’s dairy industry problems has been discussed with State and federal governments, Dairy Australia and other representative bodies.

At last Thursday’s annual WAFarmers’ dairy conference its dairy section president Michael Partridge revealed various scenarios for a plant to produce long-life dairy product had been examined.

The aim would be for the plant to “balance” milk supply from dairy farmers with demand from the State’s three major processors by soaking up any seasonal excess, turning it into products that could be released as required on the domestic market or exported.

“We did various business cost analysis of small balancing plants in the cheese area, (milk) powder area, UHT (ultra high temperature treated long-life milk) area and what they would cost and suitable commodities (for production),” Mr Partridge told the conference.

“We looked at a stand-alone plant and also a bolt-on (option) to an existing factory – why double up on everything when you can bolt a powder plant on to an existing processor potentially?” Mr Partridge said for such a project to succeed all processors would need to “buy in” and support it and government help would be needed to get it started.

It may need involvement from a third party who was not a processor or dairy farmer and it would require a return to split pricing, he acknowledged, with one price for milk going into fresh milk and another price for milk going into product to balance supply and demand.

Such a plant would “build growth and opportunity for farmers and processors”, help utilise the spring flush of milk and help WA “grow the economy and employment”.

WAFarmers, Australian Dairy Farmers, Western Dairy, Dairy Australia, State and federal government representatives, local authorities, processors and industry experts had been involved in the discussions and Coles supermarkets owner, Wesfarmers Ltd, had provided a business analyst to help assess the options, Mr Partridge said.

“We haven’t just been complaining about how dairy farmers have been mistreated, we’ve been looking at possible industry solutions,” he said.

“WA needs a State balancing mechanism.

“Before deregulation you had split pricing and each processor had their own balancing plant.

“Now no company has a balancing plant.

“When you talk to ? Continued on page 4 ? Continued from page 3 processors they often say ‘we don’t care what we pay for milk as long as our competitors pay the same price’.

“Well, pay us (dairy farmers) all 55 cents a litre for the milk you want, and the milk you don’t want can go to a balancing plant and the market will reflect what that milk is worth.

“We (dairy farmers) can live with that,” Mr Partridge told processor representatives at the conference.

Brownes Dairy managing director Tony Girgis, supply chain general manager Marc Anderson and four other staff attended the conference.

Harvey Fresh owner Parmalat was represented by WA milk supply manager Malcolm Fechney and Lion Dairy & Drinks, which produces Masters milk, was represented by agriculture procurement director Murray Jeffrey.

“This (balancing plant) is a conversation we’ve had on possible solutions for the industry (and) the discussions have been extremely broad and involved lots of people,” Mr Partridge said.

“There is no easy solution and WAFarmers can’t make it happen.

“It needs the people who can make it happen – that’s the government and the processors – working together.” Mr Partridge outlined in detail what he described as a “rollercoaster ride” of a 2016-17 year which saw four Brownes suppliers dropped when they were not offered new contracts and two of five Harvey Fresh suppliers retire when Parmalat threatened to stop collecting their milk out of contract.

He detailed how several possible solutions were explored with all parties but ultimately failed when Brownes, Parmalat or the previous State government withdrew or declined to help, even though Deputy Prime Minister and Agriculture Minister Barnaby Joyce was keen on one proposal that could have seen all contracts restored.

The last of three agriculture and food ministers under the previous government Mark Lewis was given “a lot of misinformation”, Mr Partridge said, and told the problem was “just a contractual issue between a farmer and a processor”.

“Well it was far greater than that,” he said.

“I’m certainly not going to back away from the damage it’s done to the entire industry.” Mr Partridge said Brownes had “changed direction” and was buying 40 million litres of milk a year less than what it had been, but failed to adequately communicate that change to its supply base.

If it had consulted with its supply base, as Parmalat eventually did, its over-supply problem may have been resolved without farmers being forced out of the industry, he said.

“I want to point out the reason those four farmers (Brownes suppliers) were originally offered the (two-year higherprice contracts that were not renewed) in the first place was they ticked all the boxes – they had scale, they had the right seasonality, they had quality and they were close to Perth.

“All aspects we require in the industry moving forward.

On behalf of other dairy farmers, federal Forrest MP and dairy farmer Nola Marino thanked Mr Partridge and Mr Depiazzi for their work trying to resolve the issues with processors over the past year.

“I want to acknowledge the work of Phil and Michael during probably the most trying time of our industry,” Ms Marino said.

“You had so many sleepless nights and dealt with the pain of each one of these blokes, day after day and anybody in this room who, like most of us, are lifetime dairy farmers and sometimes intergenerational dairy farmers, each one of us knew it could have been us.

“To be able to support the people that you did – I know how much you put into it and I just want to say on behalf of every dairy farmer in this room, thank you to you and thank you to WAFarmers.”

Source: Farm Weekly.