Government seeks dairy supply chain

Establishing a dairy supply chain into China could potentially provide an alternative to WA's unprofitable cheese production as a means of absorbing the annual spring flush of milk and dealing with increased production from farmers.

It could also be an important hedge against future recurrence of the current over-supply crisis directly impacting on whether nine farmers can remain in the WA dairy industry.

Agriculture and Food Minister Dean Nalder has confirmed a discussion he had with the deputy chairman of a major Hong Kong-based, State-owned Chinese enterprise about WA's dairy prospects and potential has sparked interest.

Mr Nalder confirmed follow-up discussions on establishing a supply chain into China for WA dairy products had since been initiated with the Department of State Development - State Development Minister Bill Marmion was the other government minister on the five-day China visit last month.

"I've asked staff to monitor what happens with the discussions and to keep me informed," Mr Nalder said.

He declined to name the Chinese State enterprise and said he also did not know what form possible Chinese competition for WA milk could take.

"During the conversation I did point out that we had no capacity in WA currently to produce milk powder and therefore there was no infant formula production," Mr Nalder said.

"That (milk powder and infant formula production) could have huge potential for our dairy industry as it could soak up excess milk production at certain times when there is an over-supply situation.

"It could stop surplus milk going to waste.

"It would increase competition generally for famers' milk and I think that would be a good thing.

"It won't help farmers caught up in the current situation, but more competition could certainly help prevent it from happening in the future with a similar level of impact.

"They (Chinese enterprise) might be interested in establishing their own processing plant here, they might want to buy milk from one of the processors, they might buy one of the processors - I don't know as it's very early days," he said.

The State government is doing everything it can to help resolve the issue between Brownes Dairy and Harvey Fresh and nine farmers they have told they will stop collecting milk from, Mr Nalder said.

"But I wanted to let people know that we are also looking to the longer term."

He said talks he and Mr Marmion had with Chinese business leaders and government officials generally centred on establishing a WA beef supply chain into China and addressing Chinese concerns about continuity of supply.

They also covered inefficiencies which saw some Kimberley producers trucking cattle to Fremantle for live export to avoid higher shipping costs at Broome and Derby, he said.

"It's a matter of understanding the scale of supply chains into China and having them understand that while they want certainty of supply, our producers - beef or dairy - need to be confident demand will still be there if they invest in lifting production.

"If they were to lift meat consumption by one kilogram per person which is a lot, we would need to supply an additional 1.3 million tonnes per annum.

"While discussions were mainly on beef, because of the situation with the dairy industry here, I took every opportunity that I could to raise in conversation the potential of our dairy.

"A lot the people I spoke to showed interest, and to date we have had some follow up which is pleasing," Mr Nalder said.