THE State Government has ruled out any kind of financial support for Challenge Australia Dairy (CAD) which went into voluntary administration last week.
Subscribe now for unlimited access to all our agricultural news
across the nation
or signup to continue reading
Agriculture and Food Minister Terry Redman said there was a well-established precedent for the government not to bail out businesses in financial trouble.
"What the government can do is put support services in place to make sure affected employees and communities are looked after," Mr Redman said.
"I have been in contact with receivers, administrators, Challenge management and other processors.
"There is a strong commercial interest for the industry to sort this out and there has already been a demonstration of other processors stepping in to take up surplus milk.
"This is a very unfortunate situation for Challenge employees and the farmers that supply Challenge."
Mr Redman said the situation with Challenge was not a reflection of the dairy industry in WA as a whole.
"The recent investment by Dairy West in Brownes is a show of confidence in the sector," he said.
Mr Redman also emphasised that it was CAD and not the Challenge Dairy Co-operative that was in receivership.
CAD is a joint venture between the co-op and Singapore-based QAF Group that produces the Capel butter and cheese brands for the domestic and export markets.
According to administrators PPB, the co-op "owes substantial amounts of money to its farmer members for the milk supplied to CAD and that this had caused considerable hardship."
Challenge Dairy Co-operative employs 120-130 employees, including casuals, at its Capel and Boyanup processing plants.
Challenge Dairy Co-operative founder and chairman Larry Brennen said the co-op had instigated the pick-up plan for its 50 suppliers which make up about a third of the State's milk supply.
"We are picking up milk and trading with National Foods and other companies," Mr Brennen said.
He said the co-op had always been focused on working for its farmers and that he was bitterly disappointed with the outcome.
Co-op dairy farmers supply a total of 90-100 million litres each year and there were some hopes the co-op might lease back the Boyanup plant and sell milk to the receivers to stay afloat.
The co-op traditionally supplied 35mL of milk a year to National Foods and also exported about 20mL of fresh milk to Singapore in Eurotainers, leaving about 35mL to find a home, possibly for processing at Boyanup.
But this would depend on availability of capital.
Mr Brennen it was the co-op's investment in the joint venture that had failed.
"The co-op should be able to keep its head above water if we manage it properly and make the necessary changes we have been planning," he said.
WAFarmers dairy section president Peter Evans said the big threat with the co-op going into administration was that milk would not be picked up.
"As time goes on the threat of milk not being picked up is diminishing with other processors organised in anticipation it might happen," he said.
The CAD directors appointed Jeff Herbert and Simon Theobald of PPB as voluntary administrators and had requested the company's bankers, National Australia Bank, to appoint receivers, which are PWC.
PPB said these measures were taken after attempts to raise additional funding from the company's shareholders, its bankers and prospective investors to enable the company to continue normal operations were unsuccessful.
A spokesman for the CAD board said: "Discussions with a number of prospective investors were in process when, for reasons beyond our control, we ran out of time.
"However, we are very encouraged by the responses received and will work with the voluntary administrators to pursue these options".
