11/04/2014 - 14:45

No cream tipped on free trade deals

11/04/2014 - 14:45

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A shake-up in Western Australia’s dairy industry may be set to deliver for local stakeholders, but the broader sector is unimpressed with free trade commitments made with South Korea and Japan.

A shake-up in Western Australia’s dairy industry may be set to deliver for local stakeholders, but the broader sector is unimpressed with free trade commitments made with South Korea and Japan.

On the local front, the biggest development in recent weeks has been the sale of family-run Harvey Fresh to the Australian subsidiary of Italian milk and dairy processor, Parmalat.

The sale, worth $117 million, has been considered good news for the industry as a whole.

Western Dairy board member Dale Hanks said it was likely to create more opportunities for WA milk, including supplying northern markets when Parmalat’s production there was low.

Harvey Fresh have been pretty aggressive about trying to find export markets and I think Parmalat will be able to open doors that Harvey Fresh have only ever been able to knock on,” Mr Hanks told Business News.

Some in the sector are less enthusiastic, however, including Sue Daubney from producer and processor Bannister Downs Dairy Company.

“Now we are the last WA-owned dairy processor, however our production is currently limited,” Ms Daubney said.

“[It’s] sad to see such an iconic brand as Harvey Fresh being lost to foreign ownership.”

Another development has been Brownes winning a seven-and-a-half-year deal to supply Woolworths with milk for its Select brand, which retails at $1 per litre, over former supplier Lion.

Brownes and Woolworths have said the extended term of the deal gave farmers certainty of demand.

Mr Hanks said it was positive, as Woolworths has joined Coles in stating it would only take WA-produced milk, but the extended length of the contract was “ridiculous”.

“That’s a long time in business. Unless you’re locking in a big premium I don’t know why you would sign it for such a long time,” he said.

Free trade agreements signed last week with South Korea and Japan have also been pitched as major opportunities for the dairy industry, but Mr Hanks was unimpressed.

He said any benefits would a long time to filter through to producers, as 80 per cent of milk produced in WA went to the domestic market.

Brownes managing director Ben Purcell said the FTA with Japan was disappointing for the sector, despite increased quotas and duty being lifted on certain milk products.

“Japan is a market we’re excited about but the agreement didn’t really create significant opportunities … it felt like a token win as opposed to what we’ve seen on some of the other categories,” he said.

Mr Purcell said the Harvey Fresh sale would benefit Brownes as it made it the only major WA processor that was Australian-owned (with third major processor Lion being owned by Japanese company Kirin Holdings).

Mr Purcell said the Woolworths deal indicated an increasing preference for local products, as the retailer had opted for Brownes instead of Lion, which had been trucking in milk from other states to fulfil its contract.

Lion’s loss of the contract means the volume of milk processed at its Bentley facility will be 24 million litres less, and it’s considering what that may mean for its future.

However, Lion said sales of WA-founded Masters flavoured milk remained strong and it was continuing to invest in the brand.

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