WA milk production up, for time being

But there were signs towards the end of the quarter that dairy farmer concerns about security, particularly for many in relation to next year's end of contract and renegotiation, were starting to have an affect on production volumes.

Already this season, three suppliers have been dropped by Brownes Dairy and five Harvey Fresh suppliers were told by Parmalat their milk will not be collected from January.

Dairy Australia senior analyst John Droppert said while WA milk production increased in July and August as expected, with milk volumes building towards the annual spring flush, production had dropped off in September.

"Because of the exceptional pasture growing season, WA's dairy herds are only about now achieving peak production, so the decline back in September was due to factors outside of normal dairy cow issues," Mr Droppert said.

"Obviously, by September the issues of oversupply and farmers being told their milk was not wanted were starting to gain traction and people weren't pushing production as hard as they otherwise might have.

"The uncertainty facing the WA industry as a result of the eight (farmers losing contracts) has probably been the key influence."

During the first quarter to the end of September, WA still had 157 dairy farmers, but since then one has retired early to make way for a fourth dumped Brownes supplier.

Graham Manning and Dale Hanks have been forced out of the industry, and Tony Ferraro is spraying unwanted milk onto paddocks because none of the State's processors want it.

Mr Droppert said WA milk production for the quarter was up 0.3 per cent, or about 270,000 litres, on the same quarter last year.

But with fewer farmers and a possibility there could be fewer again in January, Dairy Australia has revised its annual milk production estimate for the full season down 5pc, or 19 million litres, to 368mL for WA, he said.

Mr Droppert acknowledged that arriving at an accurate estimate was complex because while the number of farmers has decreased, he was aware they had sold some of their cows to other farmers who were producing more milk.

Some of the cows that produced grade one milk which Brownes declined to pick up from Mr Manning, are still producing milk for Brownes, and other processors, but on other farms.

In comparison to WA, national milk production for the first quarter dropped almost 10pc or about 240mL compared to last year, with total processor intake across the country about 2.2 billion litres for the year to date, according to Dairy Australia.

South Australia recorded the biggest dip relative to last year, down 15pc or almost 20mL for the first quarter and down almost 14pc for September alone.

But on volume, Victoria's milk processing intake was down the most, by 187mL, or about 11pc, to about 1.4 billion litres so far this season.

In September, Victoria's production dropped about 12pc and within Victoria, the northern region recorded the biggest fall for the year to date, down about 17pc or 87mL to 418mL compared to the same period last year.

Tasmania's first quarter production was down about 7pc and NSW production dropped about 6pc, while production in Queensland was up slightly, similar to WA.

Dairy Australia's board took the unusual step last week of announcing a mid-season annual milk production estimate after its monthly meeting to assess the affect on the industry of farm-gate prices, tight margins and extremely wet conditions across southeast Australia.

Managing director Ian Halliday described forecasting annual milk production as "a moving target".

"Given the unfolding situation, we are projecting national milk production to be down 6-8pc for 2016-17," Mr Halliday said.