The collapse of two West Australian dairies, now in the hands of receivers, has raised questions over the viability of Australia's dairy industry.
Western Australia's biggest dairy producer, Lactanz Dairies, and a family run dairy at Capel have both collapsed and acting chief exectuive of Lactanz Dairies, Michael Allen, said the company's woes are because broader industry issues.
According to thewest.com.au, Allan is based in New Zealand, where the dairy industry is thriving, and says Australia's industry is at risk unless farm gate prices rise.
"Unfortunately in WA over the years our production increased but the milk payout fell. Prices fell by more than 15 percent two years ago and on top of that land prices fell," he said.
Western Australia experienced its biggest shortfall in decades this year, with Lion, which supplies to Woolworths, bringing in milliopns of litres of milk from interstate.
While Fonterra, Warrnambool Cheese & Butter (WCB) and Murray Goulburn have announced strong opening farmgate milk prices this month, WCB's CEO, David Lord, says the company will remain cautious in the coming months.
"These movements have been very positive and give us confidence in our outlook for the first half of the season where we anticipate world dairy prices will remain strong. Given the volatility of the many external factors, such as; milk supply growth, market demand, world dairy prices and exchange rates make it difficult to predict in the longer term, we maintain a cautious approach to the second half of the year," he said.
Ben Purcell, managing director at Brownes Dairy, said farm gate prices have been given a boost over the past 12 months due to competition for local suppliers between the Lion, Brownes and Harvey Fresh processors, they're still not delivering farmers a reasonable return.
"If we don't get a fair price out of the market and a fair price back to farmers, the industry won't survive … We are not seeing people taking up dairy farming, we are only seeing exits," he said.