Dairy down, but not out

WA’s dairy industry has been dealt another blow.

More than half of the State’s milk producers are without supply contracts after Challenge Dairy Cooperative was put in the hands of administrators at the weekend.

The devastating development comes just a month after Challenge Australia Dairy (CAD) also went under owing millions of dollars.

Harvey Fresh is already talking to some of the co-operative’s producers about milk prices and possible contracts and National Foods is also likely to continue buying WA milk.

A spokesman for processor Fonterra said it appreciated how difficult the current situation was for Challenge suppliers and Fonterra was doing what it could.

While there is no immediate commitment to buy additional milk, Fonterra said it was assessing how much additional product its Brownes business could absorb.

WAFarmers dairy president Peter Evans said he was confident all producers would be picked up and while the prices on offer might not be attractive in the short-term, he hoped things would equalise over the next two years.

“I don’t think producers should panic, we still have the same number of farmers, a similar amount of milk and the same markets,” Mr Evans said.

He said CAD had been selling milk to National Foods and this arrangement, as well as the deal to export milk to South-East Asia, was likely to continue, adding smart farmers would get through it.

“But farmers with high cost of production, no matter who their supplier, will need to be pretty careful over the next few years.”

The ripple effect of the Challenge fallout is hurting South West small business and dairy industry service suppliers.

“We are certainly feeling it,” Neil Earl, of Farmwest Services in Bunbury, said.

“We are in the direct line of fire. It would be right to say it’s not just the dairy side of things, but all agricultural businesses in the South West that are suffering.

“We have had to lay staff off and are in the process of downsizing, so it has definitely impacted us.

“But we have been in the industry now for well over 40 years so it is something we will manage through.

“We will bunker down and keep trading.”

Mr Earl said the poor season was also causing all agricultural industries to struggle.

Margaret River Agricultural Services owner Brad Crawford said sales had “absolutely” been affected by the collapse of Challenge and he was letting people go.

“Dairy farmers are a reasonable part of our business and a lot of our clients are Challenge Dairy suppliers,” Mr Crawford said.

“There has been a general decline in spending, but the last couple of months have been a real killer with virtually nothing spent as far as dairy goes.

“Most of our clients run accounts. I can live with farmers owing money, but they are not spending anything, not a cent.”

Mr Crawford said the situation was a real worry, not only for himself and the families his business supported, but for the future of dairy farming in WA.

“It’s hard to say how things will go over summer, a lot depends on how the other processors respond,” he said. “I’m really worried about how many dairy farmers will be left.”

Agriculture Minister Terry Redman said the situation could not get much worse, with worried producers trying to negotiate new deals with processors.

The State Government is working with industry to co-ordinate services, including on-farm visits for impacted Challenge suppliers.

“The visits will enable farmers to discuss their concerns and can lead to advice on what support is available, whether it be counselling or financial services,” Mr Redman said.