Tasmanian dairy farmer Michael Palmer is converting his Rocky Cape property to a second dairy farm. He says milk production growth must be sustainable and will most likely be driven by higher prices.MARK Smith – the executive officer of DairyTas – played a major role in putting together the “filling the factories” project and remains hopeful the target of 40pc more milk by 2017 can be accomplished.
He says now is an exciting time to be dairying in Tasmania, with big processors expanding their capacity.
And last month a new manufacturer upped the ante.
Tasmanian Dairy Products at Smithton, part-owned by co-operative Murray Goulburn and Mitsu-bishi, began churning milk into dairy food ingredients for rapidly growing markets in Asia and the Middle East.
The factory’s capacity is 250ML, and the extra competition has seen some suppliers switch between companies.
The need to fill the State’s factories has become acute, Mr Smith said.
“This is a collaborative project and we haven’t really seen something like this before,” he said.
“Unless we grow in a quick period of time, we risk losing a processor and farmers could go back to not having a choice.”
At the moment, Dairy Australia, DairyTas, Cadburys and Tasmanian Dairy Products have committed to funds for the growth project, but more funding from State or federal government is required to keep it going.
Mr Smith said strategies to increase production included building herd numbers and labour.
“We want to grow our existing businesses,” he said.
“But we also want to attract new people to the dairy industry. This includes dairy conversions, particularly through the Midlands where irrigation has become available.”
While scepticism had surrounded dairy conversions in the past, Mr Smith said some had been completed recently with success.
“About 50 dairy conversions will get us half the 350ML we needed,” he said.
Investment was also a part of the growth plan.
“We are not looking to sell off the industry to foreign investors. We are looking at local investors,” he said.
But with the market facing a period of volatility, Mr Smith admitted it would be a huge challenge to boost production.
“Last year we had our first increase of registered dairy farms,” he said.
“We went from 437 farms to 444.
“It’s not a big lift, but the fact it’s an increase is great. We hope this is a turning point.”
But out in the paddock, some dairy farmers say they will only increase their cow numbers if milk prices improve.
Michael Palmer, who milks 850 cows at Sisters Creek, has just switched to supplying Tasmanian Dairy Products.
“It suited us, we could make more on the bottom-line and that’s what it’s all about,” he said.
He has owned another 121 hectare farm at Rocky Cape for a number of years, which runs young stock.
The plan is to convert the property into a dairy, but he is doing it for his own reasons.
“I am doing this solely to build equity in another 300 cows. There’s not enough money in dairying for conversions.”
Mr Palmer said large Holstein cows could fetch up to $1500, so expanding his herd on the second farm should allow equity to grow.
The conversion would not cost a huge amount of money, he said.
“It’s already got laneways, fencing, pastures and water troughs and it’s 50pc irrigated.
“I’d like to think we can build a second-hand dairy for about $400,000.”
He will not need to purchase more stock because surplus heifers on the Sisters Creek operation can be moved to Rocky Cape ready to be milked.
Mr Palmer remains hopeful milk prices can improve and says dairying is a great industry to be in, but admits he is concerned about the project – which aims to rapidly boost production.
“Tasmania saw a 10pc lift in production last year, but that’s because grain prices were down and the conditions were good,” he said.
“If we have a bad year, that will quickly turn around.
“There’s more to growing the industry than building a factory. It must be sustainable and milk price is going to be a big driver.”
In the State’s north-east Stephen Creese, who heads up the farming business Clovelly Enterprises, has just added dairying to his property portfolio.
“We’ve got about four to five farms and this is our first dairy,” he said.
The 1000ha conversion supplies the small processor Tamar Valley Dairy and cost about $8M all up.
“We’ve been milking 1300 cows for about a month now,” he said.
Although there is a lot of excitement in the Tasmanian dairy industry at the moment, Mr Creese said it was important to do your own sums.
“There is a lot of hype, but we will work this out for ourselves rather than get caught up in the moment,” he said.
In the factories, an enormous amount of expectation has been placed on the “filling the factories” project to succeed.
Fonterra managing director Simon Bromell says the company has spent $11.5M on upgrades at its Wynyard and Spreyton sites. “The growth needs to be sustainable,” he said.
“The good thing is there is potential for growth in Tasmania and it’s great to see industry participants come together like this to make it happen.”
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