Milk crisis near: farmers

WA could be facing a milk shortage within weeks, as dairy farmers warn that processors need to increase milk prices immediately.

Production has continued to slide since July last year and on December's figures had contracted nearly 7 per cent compared to the same time in 2010.

South West dairy farmer Peter Giumelli described the current situation as unsustainable and said something had to give.

"State production is in decline and there is a belief out there that processors will run out of milk in late February or early March - that's how close it is," he said.

"What farmers have done is sell their young females to China and the replacements are not coming into the herd to replace the existing milkers.

"This particular summer, when milk should be up (in volume), instead it's down.

"The processors are not making a fortune but somewhere there has to be pressure coming from below and I think that lack of milk will cause some sort of disruption to the status quo."

And with the sale of WA's third biggest dairy, Ravenhill, to Chinese investors, some are saying the WA industry is at a crossroads.

The new owners are not set to take over the Ravenhill dairy until August and claim they will continue to produce milk products for the local market.

However, speculation is already mounting in the industry that large volumes of milk could still be diverted from the domestic market.

Brunswick dairy farmer Michael Partridge believes that could be a good thing for the industry, particularly if it spurs a price rise for producers.

He said WA was perfectly positioned to capitalise on growing milk markets in South East Asia but was being hog-tied by low milk prices and the duopoly of Coles and Woolworths.

"There's going to be a shortage of milk. It's very critical now," Mr Partridge said.

"We're at a level where the price isn't obviously enough, because production is going down despite cheaper feed this year.

"It could cost long-term opportunities for the WA dairy industry going forward - there's opportunity to prosper and grow but it needs an increase in price to do that.

"The Chinese buying Ravenhill shows that someone else values the dairy industry more than Coles and Woolworths, which I see as a good thing.

"Hopefully the supermarkets will get short of milk because that's the only language they understand.

"Then the price should improve so farmers can invest in their future and continue to supply WA with good milk."

Capel dairy farmer and WAFarmers president Mike Norton agreed that shortages were imminent, but he does not believe the State will run out of milk.

He said that instead, processors would counter fresh milk shortages by adding permeates or powder from other States.

"We will never run out but that's not to say consumers are going to get genuine fresh milk," Mr Norton said.

Some processors have already responded to shortage concerns. In January, Harvey Fresh offered its suppliers an incentive of 3-5 cents a litre for milk production in excess of their monthly production.

Harvey Fresh was the only processor to offer such a price bonus but dairy farmers claim the incentive is not nearly enough.

Mr Norton said growers needed a price rise across the whole of production, not just extra production.

The current average milk price is about 41c a litre but Mr Norton believes WA dairy farmers need an average price of 50c a litre to encourage a lift in milk production.

"The decision (by Harvey Fresh) wasn't welcomed with open arms by the growers because it was completely inappropriate in regard to the plight that we are in," he said.

"Unfortunately, if something is not done very quickly I think there is another group of farmers who will exit the industry."