Let’s milk deal for all it is worth

The West Australian - - WEST BUSINESS - Ben Har­vey

Your first re­ac­tion was prob­lem “Oh, no”. The thought of a WA in­sti­tu­tion such as Brownes Dairy be­ing owned by for­eign­ers just doesn’t sit well, does it?

And of all the peo­ple to buy it, the Chi­nese? Who knows what mo­tives the Peo­ple’s Repub­lic has for a brand that has been part of WA for a cen­tury, right? Will it mean our dairy farm­ers will be screwed (even more) by a face­less cor­po­ra­tion listed on the Shang­hai Stock Ex­change?

No. The eco­nomic re­al­ity is the sup­ply/de­mand pen­du­lum is go­ing to tip back in favour of the peo­ple who own the cows.

Any­one who thinks hav­ing 1.4 bil­lion more cus­tomers com­pete for your prod­uct won’t put up­ward pres­sure on farm-gate prices is let­ting bel­liger­ent xeno­pho­bia over­ride eco­nomic re­al­ity.

Will all our milk be sent straight to China?

Here’s the grey area. It’s a free mar­ket and Shang­hai Ground Food Tech will send Brownes prod­ucts wher­ever mar­gins are best.

If Chi­nese shop­pers are will­ing to shell out big amounts for fresh milk and tight-fisted West Aus­tralians re­main wed­ded to pay­ing $1 a litre then sup­plies will flow north. Guess what hap­pens then? A price sig­nal is sent to WA farm­ers to in­crease their herds and pro­duce more milk to sat­isfy the lo­cal mar­ket.

And don’t for­get the new own­ers know that when you op­er­ate a business in a for­eign coun­try you are a guest re­ly­ing on the good­will of a host that de­cides whether you get things such as ex­port li­cences.

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