Dairy industry to bulk up

THE State Government is leading a push to expand WA’s dairy industry. However, debate rages as to the best way to go about this.

There is also a concern that WA’s industry, even after considerable expansion, will still be too small to compete with the big players out of Europe, the US and New Zealand.

New Zealand has become an even stronger player through the creation of Fonterra – an amalgam of many of that nation’s dairy players.

WA Agriculture, Forestry and Fisheries Minister Kim Chance said the State’s dairy industry had the capacity to grow and, indeed, needed to grow.

“We need to double our production,” he said.

In 2000-01 WA’s dairy exports were worth $63.4 million. The State’s largest export customer was Singapore, followed by Japan, China-Hong Kong and the Philippines.

Mr Chance said dairy expansion had to be managed carefully.

“Firstly we need to go to the market to find out what prospects are out there,” he said.

“We’re already exporting bulk milk to Singapore. We can do the same to Indonesia. That is also a market that can afford our price.”

However, Mr Chance said the real value lay in value-added dairy products.

“Dairy consumption in China is growing at 20 per cent per annum. That looms as a prospective market,” he said.

Challenge Dairy Cooperative has moved a step closer to finalising a joint venture proposal with Beijing Sanyuan Foods.

The cooperative hopes the deal will be a 50-50 agreement, however industry sources are suggesting that a 75-25 split in China’s favour is more likely.

It is understood WA dairy farmers will have to put up $25 million, but only have asset backing for about half that amount.

Mr Chance said there were several dairy expansion solutions available in the South West.

“There is also the possibility for dairy in the central and Mid West coast under irrigation,” he said.

Agricultural consultant Alan Peggs is one of a three-man group, also comprising an electrical engineer and a production geologist, considering the Mid West proposal.

His group has options on 29 properties on about 45,000 hectares in the Mid West and has already done a preliminary feasibility study on the project that has determined it would get a reasonable return on its investment.

It hopes to have a final, “bankable” feasibility study ready by the end of the year.

The group is looking to produce about 25,000 litres of milk a day for 10 months of the year. For that to happen it will need to run about 1,000 cows.

Mr Peggs said the company had narrowed down its land search and had used a hydrologist to find suitable wells. Access to a three-phase power supply also was a consideration.

“We’ve already had interest from New Zealand, the eastern States and Ireland,” he said.

Mr Peggs said there was a good demand for milk in WA.

“The existing dairy industry in WA only has a limited capacity to increase production,” he said.

Mr Peggs is organising a field day on October 22 to consider options for dry-land dairy farming in the Wheatbelt.

WAFarmers dairy section president Tony Pratico said he believed the Eneabba experiment was doomed to failure.

“I’ve been to Queensland where they have similar climatic factors. There they get 3,000 litres to 4,000 litres per cow a year. That production is way below ours [in WA’s main South West dairy area] of 6,000 litres to 7,000 litres,” he said.

“We’ve had Katherine Dairies and dairies up in the Ord. Up there they were getting $2 a litre. At Eneabba they will be getting 29 cents a litre.”

Mr Pratico admitted residential development was starting to threaten some of the traditional, near-ocean South West dairy properties but said there was still a lot of country available around Williams and Boddington.

He runs a farm near Greenbushes and said there was a lot of suitable dairy farming land in that area.

“A lot of the land around here is sheep and cattle country. All we need is someone to make a move towards broadacre dairying,” Mr Pratico said.

“Our only threat down here is from the blue gum plantations.”

Mr Pratico said there had been moves to set up dairy farms around Albany but that project had withered because of the high cost – around 4 cents per litre – of trucking the milk to Perth.

Mr Peggs said his Eneabba project would only face haulage charges of around 1 cent to 2 cents per litre.

Mr Chance said New Zealand dairy giant Fonterra’s sheer size had implications for WA.

“If it takes a major ownership position in WA it could lock up the WA market,” he said.

“We’ll be left with Challenge Dairy and Harvey Fresh. If that happened I believe the ACCC would insist that National Foods divested itself of some of its liquid milk operations in WA. That will leave a lucrative proposal for another player to come into the market.”

Deregulation has also put a crimp in expansion plans. WA’s dairy industry is still shrinking two-and-a-half years after it was deregulated.