FURTHER rationalisation of the WA dairy industry is expected as it comes to terms with having one less processor and a surplus of milk.
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Challenge Dairy Co-operative last week decided to wind up about a month after its joint venture company Challenge Australian Dairy (CAD) was placed into voluntary administration.
The co-op had initially tried to go into voluntary administration but soon found that under the Co-operative Act a co-op could not go into administration.
Instead, it went into a "standstill no trading mode".
There were initial fears the co-op's suppliers would not find a home for their milk but after a flurry of meetings all milk found a processor, although not all at the same price.
Farm Weekly understands 25 million litres of co-op milk is going to National Foods (which had traditionally taken 35mL from the co-op each year) while another 25mL is going to Fonterra with the balance of 35mL going to Harvey Fresh.
One was paying a below-cost of production yearly average of 28c/L while another was guaranteeing 33c/L across a year, with these prices well below what their existing suppliers were receiving.
Co-op suppliers have already been culling cows and selling heifers to make ends meet.
This could mean more dairy farmers will exit the industry unless these prices quickly improve.
Summer is a time when milk prices are highest due to the high cost of production and a fall in supply but going out of summer these prices could be expected to fall quite drastically unless fewer cows are milked.
Some co-op suppliers are also owed hundreds of thousands of dollars for milk delivered during the past three months.
WAFarmers dairy section president Peter Evans applauded Harvey Fresh, National Foods and Fonterra for picking up the Challenge suppliers' milk and the role Agriculture and Food Minister Terry Redman played during the transition.
"I would like to acknowledge what the other three processors have done in that they have co-operated to pick up all Challenge's milk," he said.
Mr Evans said Mr Redman stepped in at a critical phase and had possibly prevented the risk of milk not being picked up.
"When he stepped in there was a risk," Mr Evans said.
"From our point of view we are satisfied this stage is over and we look forward to working with processors in a more stable environment."
He said while the Challenge suppliers would be receiving different prices depending on which processor picked them up they would be no worse off than they were and expected prices would level out across processors over time.
He said more dairy farmers would probably exit the industry during this phase.
Mr Redman welcomed support shown by Fonterra and Harvey Fresh for the WA dairy industry in the wake of recent uncertainty.
He said Harvey Fresh moved quickly to take up extra milk and provide security to a number of Challenge suppliers.
"Many dairy farmers have been faced with the prospect of not being able to find a home for their milk, so the actions of Fonterra and Harvey Fresh will come as welcome relief," Mr Redman said.
"I have appreciated the open and supportive relationship between my office and Fonterra throughout this crisis and I am very grateful for the valuable role Fonterra has played in helping WA dairy farmers endure these current challenges.
"From the outset, the State Government proactively provided a range of support services for families and communities, farmers and employees.
"I am pleased by the support shown by these companies and my office will continue to talk with industry."
The Agriculture and Food Department is working with Dairy Australia and Western Dairy to deliver Taking Stock sessions to co-op members now renegotiating new supply contracts with other dairy processors.
The sessions, to be delivered by specialist local consultants, will enable farmers to make more informed business decisions.
This program will supplement the farm visits already being undertaken by the South West Development Commission, which gives impacted dairy farmers the chance to discuss their concerns in a non-threatening environment and get advice about what support is available.
There is also support services available to employees of CAD through the State Government's 24-hour free-call WA Worker Assist helpline (1800 200 680).
Impacted employees can also access information on support services from Centrelink on 13 28 50.
Dairy producers can contact the Department on 1300 725 572 for further advice and information on available support services.
