Challenge milk payments in limbo

Challenge milk payments in limbo


Agribusiness
WAFarmers dairy section president Peter Evans attributed some of the Challenge's problems to an ageing plant, saying it received a fair payment for about half of its milk on-sold to National Foods.

WAFarmers dairy section president Peter Evans attributed some of the Challenge's problems to an ageing plant, saying it received a fair payment for about half of its milk on-sold to National Foods.

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CHALLENGE Dairy Co-operative farmers are facing an uncertain future as they wait for milk payments and the co-op board and management try to sort out reported cashflow problems.

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CHALLENGE Dairy Co-operative farmers are facing an uncertain future as they wait for milk payments and the co-op board and management try to sort out reported cashflow problems.

Challenge suppliers usually get paid every fortnight, but by Tuesday morning their mid-October payment was two weeks overdue, and a month had passed since an interim payment at the end of September.

Challenge chairman, Larry Brennen, and management would not return calls from Farm Weekly , but Mr Brennen was quoted in another media outlet saying the co-op was working to resolve a "cashflow" problem.

Challenge's 40 to 50 suppliers are already on a spring price of 24c a litre, which is below the cost of production and about 14c/L less than what suppliers from other processors are receiving.

WA Farmers dairy section president, Peter Evans, attributed some of the co-op's problems to an ageing plant, saying it received a fair payment for about half of its milk on-sold to National Foods.

Mr Evans said he understood Challenge was making about 12c/L profit on about 35 million litres sold to National Foods.

"What I am saying is Challenge is making a fair sort of profit on the milk they are taking in, by selling it to National Foods, and they are paying 24c/L to their suppliers and still having problems," he said.

"It means they are not making much on the rest of their milk, and I think one of the reasons for that is that their processing plant is very inefficient."

"It is an old plant that costs a lot to operate."

Mr Evans, a Fonterra supplier, said there might be some problems if Challenge closed, but these problems would not be insurmountable.

"We could work out way through it," he said.

"There might be some short-term problems but we have some short-term problems now.

"I don't see a meltdown if Challenge stops trading or if anybody else stops trading."

Cowaramup dairy farmers, Robert and Jacqui Biddulph, milk 600 cows which produce 15,000L a day and at 24c/L are now owed more than $100,000.

"We are currently owed a month's worth of milk," Mr Biddulph said.

He said there were concerns but directors were keeping suppliers informed of the situation and were still hoping the situation could be resolved.

"It would be disastrous for the industry if the co-op fell over," he said.

"It's not just a simple case of other companies picking up our milk, because they don't actually want it.

"Other companies are only pursuing the white milk market and are not interested in adding value to the milk, so that milk doesn't have a value-added home to go to."

Mr Biddulph said while some people believed there were too many processors in WA and that Challenge should be the one to go, the co-op was the only one trying to add value to the last litre of milk.

"That's a concept other people struggle to understand," he said.

"It is a very difficult time for all concerned, but we are not giving up the fight at this stage and are still hopeful a resolution can be found.

"Obviously the business needs to change drastically as it has been hamstrung with the infrastructure it has inherited, but that doesn't mean it can't change."

Mr Biddulph said even if the co-op called-in voluntary administration, he would expect to be paid the money owed for the last six weeks.

He thought administrators were going to be called-in on Monday, but had since been given some hope a cashflow solution could be worked out by the end of the week.

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