Queensland milk supplier Parmalat is considering a move down to Sydney, after it secured contracts with farmers in New South Wales over the last four months.
About 130 million litres of milk per year has been secured by Parmalat in the deals with NSW suppliers, Farm Weekly reports.
The milk will fill the Lidcombe plant, in Sydney’s southwest, and will include production of the controversial Woolworths homebrand milk.
The debate over the milk price wars that began mid-year, are still continuing, with experts saying the $1 per litre on milk initiated by Woolworths’ arch rival Coles will drive dairy farmers out of business.
The contract with the supermarket giant is worth more that 110 million litres of milk per year, compared to Parmalat’s Pura milk sales which total 60 million litres per year in NSW.
Parmalat have sourced recruits from the Southern Highlands, South Coast, Manning and Hunter Valley.
Up to 14 million litres will be provided per year by a farm in the Shoalhaven Valley.
Parmalat is also considering transferring some of its Pauls modified milk production, including Skinny Milk and PhysiCAL, to the Sydney plant.
"Trying to service the Australian market with milk processed in Queensland milk is not so sensible in the long term," Parmalat Commercial Development general manager Vince Houlihan told Farm Weekly.
Houlihan anticipates many of the almost 700 dairy farmers in Queensland will leave the industry within the next decade.
The average age of dairy farmers in the sunny state is 61, higher than that in NSW.
"NSW has quite a few older farmers in a similar position – we’re on the cusp of a general shift in numbers out of the industry leaving fewer farms to rely on, particularly in northern climate zones," he said
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Meanwhile, increasing volumes of surplus cream produced as part of the milk modification process made Sydney a likely candidate for cream and custard product production, supplemented by extra milk sourced in NSW.
"We are steadily increasing our operations at Lidcombe and maybe next year we’ll be able to use the plant for more product consolidation," Mr Houlihan said.
However, Parmalat’s expanded processing activity in NSW would not make up for a trend towards dairy processing shifting further south to Victoria.
Dairy Farmers Milk Co-operative (DFMC) chairman, Ian Zandstra, told Farm Weekly that while his members would earn less for their 340m litres supplied this year, Parmalat had probably cut the base farmgate price by about three cents a litre by signing new recruits, meaning farmers would earn less than most DFMC members.
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