THE release of a pre-feasibility study for the expansion of WA's dairy industry has been the source of much debate in the sector this week.
The Department of Agriculture and Food (DAFWA) conducted the study, which lays out costings and business plans for potential investors.
China is seen as the main avenue for investment opportunities with much of the costings based on supply to Shanghai.
The study provides two potential projects, one is the production and export of 30,000 tonnes of whole milk powder, while the second is the production of 100 million litres of bulk fresh milk.
It includes some left-field options for each study, including establishing "feedlot dairies" in the Great Southern region, where land is cheaper, for the milk powder production.
DAFWA's analysis indicates that the whole milk powder production and processing would require a $650 million capital investment, including $95m for a processing plant.
It also believes the purchase of 7700 hectares in the South West and up to 55,600ha in the Great Southern is achievable.
The whole milk powder study is based on the assumption that a new investor can develop 10 farms in the South West, with each running 1000 milking cows.
To produce the volume of milk needed to have adequate milk powder supplies, there would also need to be at least seven feedlot dairies running a total of 20,000 cows.
The report says the majority of the bulk fresh milk could be sourced from new farms established in the South West region.
The report assumes that a total of 12 new South West farms would be required to supply adequate milk to support a 100mL bulk milk processing plant.
The farm establishment costs to get to this point would be $145m.
The analysis believes that to produce 100mL of milk for export in bulk would cost between $192-$196m and would have an estimated cash operating cost for milk delivered to Shanghai of approximately 63 cents per litre.
DAFWA executive director Kevin Chennell said the pre-feasibility study hoped to open the path of opportunity for local, national and international investors.
He said it was one thing to talk about opportunities that exist but you actually had to line some markets up.
"You actually need to show these investors that the production is actually feasible and plausible," Mr Chennell said.
Mr Chenell said the study looked at how the WA dairy industry could expand.
He said there were opportunities in Asia, the Middle East and around the world as many countries didn't currently have the production capacity to meet their needs.
"They are looking for how they can source their food in a secure way," he said.
"Now whether anyone is going to invest today, tomorrow, in five years or 10, I think that will drive itself.
"Whether the money comes from a local firm, or a national dairy firm, or an investor from an international firm, the benefits will all come back to WA and those benefits could be huge."
WA dairy farmers are sceptical about foreign investment after Chinese investors pulled out on potential deals with two of WA's biggest dairies, the Ravenhill dairy at Narrikup and Lactanz at Scott River in recent times.
But Mr Chennell said the Chinese were a reliable investment partner.
"I personally have worked with the Chinese for about 15 years," he said.
"We found they were reliable, they do pay and they honour their commitments."
Mr Chennell said it was not uncommon for deals to collapse in business and he had faith in Chinese ethic and spirit.
"You only need to look at the mining boom that WA has had in the last 20 years and that is mostly reliant on the great relationship we have with China," he said.
And amid fears from WA dairy producers that the local supply chain could be compromised in the future, Mr Chennell said there would be potential for existing suppliers to service any introduced supply chain.
"Where else are they going to get the extra milk," he said.
"It's hard to believe that you wouldn't get a flow-on effect and there would be more demand.
"Investors would look around at those local producers and processors and say we can work with them."
Mr Chennell said the market for whole milk exports already existed.
"The world is running at about 18 billion litres per annum growth for all milk products," he said.
"Now that amount of production is the volume that New Zealand puts out every year.
"Where is that supply going to come from?"
Mr Chennell said foreign investors were looking to take that milk to their own country and would want to have security of production and export.
"They are not looking to compete in the local market, they don't need to do that," he said.
"It doesn't interfere with the current supply chain but it is possible that there would be business opportunties for the current supply chain."
WAFarmers president Dale Park said it was an aspirational study and he was sceptical about the outcomes.
"What DAFWA has done with this study is outline what is possible," Mr Park said.
"Whether it is possible or not is another question."
Mr Park said there were questions over numbers presented in the study and it didn't address regulations and red tape.
He said any new supply chain would impinge on those already existing in WA.
WA's dairy sector currently produces about 350 million litres of milk a year, but does not currently produce milk powder.
