Dairy farmer moves on with fresh contract Harvey snubs Lactanz plan
Harvey dairy farmer Dale Hanks, who was forced out of the industry in 2016, is again milking cows after being thrown a lifeline by Parmalat-owned Harvey Fresh.
Mr Hanks was one of three producers who lost their dairy livelihoods in October 2016 when Brownes did not renew their supply contracts because the market was oversupplied at the time.
But after negotiating a contract with Harvey Fresh a year later, Mr Hanks has restarted his dairy operation, his milk being collected by his new processor since December.
Mr Hanks said the contract came about after one of its suppliers retired from the industry. That meant there was room to replace this volume under Harvey Fresh’s “litre out, litre in” policy.
As well as losing his main source of income for more than a year, Mr Hanks estimates replacing cows and recruiting and training new staff had cost him hundreds of thousands of dollars.
Nonetheless, the third-generation farmer was keen to re-enter the dairy industry, given he had more than $1 million worth of infrastructure sitting idle. “I had lost my mojo about the dairy industry, given the kick in the guts we got from Brownes, but I’m getting enthusiastic again under our new processor,” he said.
Mr Hanks said his business would operate at a smaller scale.
Until Brownes axed his contract, Mr Hanks had 350 cows and was supplying 3 million litres a year. He now has 150 cows which will increase to 220 in coming months.
“We’ll supply 1.7 million litres this year, building up to 2.1 million litres in 2019 (as the younger cows become more productive), and will stay at this size,” he said. Ambitious growth plans by WA’s biggest milk producer Lactanz Dairy have been dealt a blow after Parmalatowned Harvey Fresh said it would not renew its contract to process more than 20 million litres of milk a year.
Melbourne-based AAG Investment Management, representing a fund based in northern Europe, last year revealed plans for Lactanz, at Scott River in the South West, to almost triple production over three years.
Industry sources say Harvey Fresh advised Lactanz it could not accommodate the company’s plans and therefore would not renew its contract after it expired in July.
The move has triggered other events, signalling a more positive outlook for the embattled WA dairy industry.
To replace the milk that will no longer be supplied by Lactanz, Harvey Fresh has issued new contracts to at least four smaller farmers who previously supplied Brownes, while negotiations with other producers are continuing.
Brownes was last year offering contracts that paid farmers 4¢ to 5¢/litre less than Harvey and Lion suppliers, a move described by many as devastating and not sustainable.
Industry sources say Harvey Fresh’s wooing of former Brownes suppliers could leave Brownes, which was recently acquired by Chinese dairy giant Shanghai Ground Food Tech, with a shortfall of milk at a time when the business was planning to grow output.
But this was rejected by Brownes managing director Tony Girgis, who said his firm “does not and will not respond to speculations or rumours”.
“We have a proactive, direct and positive engagement and communication process with our suppliers and we have no current or anticipated future shortage of milk because our committed suppliers have responded well to our demand plans,” Mr Girgis said.
WAFarmers dairy section president Michael Partridge said finally competition had been created in the market place, which was good for farmers. “We hope competition will lead to an improvement in prices paid to farmers going forward,” he said.
WA’s 145 dairy businesses produce about 380 million litres of milk annually, so Lactanz’s current output of about 22 million litres represents more than 5 per cent of the State’s production..
Harvey Fresh WA milk supply manager Malcolm Fechney and AAGIM executive chairman Marcus Elgin declined to comment.
AAGIM bought Lactanz for $30 million in 2016.
Harvey dairy farmer Dale Hanks recently re-entered the industry after being forced out in 2016.