Lactanz receivership will not create milk shortage, says Australian processor

By Fiona Barry

- Last updated on GMT

(Picture credit: RichardBH/Flickr)
(Picture credit: RichardBH/Flickr)
Australian dairy processor Brownes has played down concerns about a potential summer milk shortage following the recent announcement that its supplier, Lactanz, has gone into receivership.

Speaking at the Western Australia Farmers Dairy Conference last month, Brownes managing director, Ben Purcell, said that despite its milk supplier Lactanz going into receivership, it is not expecting to experience any shortages during the Australian summer, which runs December to February.

"Brownes will absolutely not be short of milk next summer – I can guarantee you that," ​said Purcell. "In fact we’ll have far more milk than we had this summer."

Brownes currently processes around 145 million litres of milk per year. Lactanz, which produces 15m liters of milk a year, is Brownes’ largest supplier.

Despite going into receivership, Lactanz will continue to fulfil existing contracts with Brownes until 2017, said Purcell.

Purcell added that Brownes would take possession of Lactanz’s herds on July 1, “and we’re working with the receivers to see if we can keep some or all of the herds on those particular farms.​”

Brownes vows support for farming operation

Purcell was asked, in the event of the receivers, Ferrier Hodgson, selling off the land, what Brownes proposed to do with the 4500-head Lactanz cattle.

He replied “I think the best option would be for those animals to stay on those farms and to continue as an operation.

“The Lactanz business itself is a good business, it just had too much debt. It’s a reflection of a decade of neglect. Of not being treated fairly. It’s a reflection of critical levels of debt. The Lactanz situation, that’s incredibly disappointing.

"We did a lot of work to put together a business plan that we thought would work for the Lactanz group and their banks, and unfortunately it was a case of everything being a bit too late.

“The banks had probably come to the end of their tether with it.

“If we can’t get an arrangement in place with the receiver, then we will move those animals onto Brownes farms, and we have a plan in place to do that.”

Slashed milk prices blamed for dairies' predicament

Lactanz acting chief executive Michael Allan blamed the fall in milk prices for industry problems in Western Australia.

The controversial policy employed by Australian supermarkets Coles and Woolworths of selling milk for AUS$1 ($0.93) per litre has forced prices down across the board.

This year Lion, the processor which supplies Woolworths, brought in milk from outside the region, creating a supply shortfall in Western Australia.

Unfortunately in WA over the years our production increased but the milk pay-out fell. Prices fell by more than 15 per cent two years ago and on top of that land prices fell,​” said Allan.

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