Euro fund sold on WA dairy

The new owners of WA’s biggest milk producer see nothing but positives in the local dairy industry and have revealed plans for multimillion-dollar upgrades on their cluster of four farms near Scott River.

AAG Investment Management executive chairman Marcus Elgin said he did not agree with claims that dairy farming was difficult in WA because of the climate and high costs of production.

AAGI, acting on behalf of a fund based in northern Europe, purchased Lactanz Dairies for about $30 million and plans to increase annual production of about 20 million litres by at least 25 per cent.

Mr Elgin said AAGI had invested almost $800 million in Australian farmland since 2002, with most of the money coming from overseas, and northern Europe in particular. The investments include cropping and sheep properties near Albany.

“We think WA is a good place to invest in the kind of agriculture that we like to invest in, which tends to be livestock and crop focused,” Mr Elgin said.

The Lactanz dairies will be run by share farmers with the milk processed and marketed by Parmalat-owned Harvey Fresh.

The dairies were in the hands of receivers Ferrier Hodgson for three years after collapsing with debts of $21 million under New Zealand-based owners.

Mr Elgin said AAGI, which has 11 dairy farms in Victoria, planned to use the share farming model to turn Lactanz into a top quality business.

“We intend to breed better cows, we are certainly going to feed them better, we are going to invest in infrastructure and make sure the properties are easier to manage and the herd health is improved,” he said.

AAGI will invest in dairy technology and water-use efficiency.

The purchase included 2340 hectares of farmland, about 4000 milking cows, water rights and 23 irrigation pivots.

Mr Elgin said conditions for dairy farming in WA compared favourably with Victoria, southern NSW and Tasmania.

“I would say that WA dairy farmers should be thrilled with their location and their pricing structure and the general cost of production,” he said. “You have a long growing season, many places have excellent and a reliable supply of quality water, you have access to a grain market which is immediate and enormous and there is a huge area of land if you want to agist cattle.”

Last week, WAFarmers said the industry faced an oversupply problem after processors Brownes and Harvey Fresh told some farmers their supply contracts would not be renewed.