Australian dairy farmers say the future of their industry is at a «tipping point», as foreign companies jostle to take over veteran Victorian producer Warrnambool Cheese and Butter.
They are also telling the Australian Competition and Consumer Commission (ACCC) to «back off» and allow them to form a cooperative that could fight off the international bids and secure Australia’s food supply.
Until recently, Warrnambool Cheese and Butter was little known outside its home state.
But the battle for control of a relatively small dairy manufacturer in western Victoria, which has been quietly churning out dairy products for 125 years, has suddenly aroused great international interest.Â
«It has a very proud history,» Warrnambool Cheese and butter chief executive David Lord said.
«We take into the plant up to a billion litres of milk from over 600 farms in the region.»
Warrnambool Cheese and Butter has become the nation’s second largest dairy exporter. This has made it a red hot takeover target, particularly as the market booms in response to growing Asian demand.
Murray Goulburn Australia managing director Gary Helou says the big demand is coming from China.
«They’ve gone from nothing to the world’s biggest dairy importer,» he said.
«Over 10 years that import appetite will double yet again. Australia should be positioned to profit from this growing trade.»
Roma Britnell, a dairy Farmer in Woolsthorpe, Victoria, likens it to the mining boom.
«They’re calling it the dining boom,» she said.
«We should be the ones preparing ourselves and getting organised just like those major multinationals are. They’re smart. We need to be as smart.»Â
Board keen on Canadian offer but farmers fear «surrender»
The close contest to control Australia’s oldest surviving dairy processor is now between this country’s largest dairy farmer cooperative Murray Goulburn and the former coop, now small corporation Bega Cheese.
But both are dwarfed by global giants of the dairy industry: New Zealand’s Fonterra, Japan’s Lion and Canada’s Saputo.
Mr Lord says the company has always known their assets were attractive to their competitors.
«These assets that have been 125 years in the making are highly strategic,» he said. «They’re unique.»
Since September, the competitors have been outbidding each other. The Warrnambool board has recommended its shareholders accept the latest offer by Canadian giant Saputo.
Though this would almost double the company’s value, it has sent a tremor across Victorian dairy farms and beyond.
«The future ownership of Warrnambool Cheese and Butter is a critically important issue unfolding in our region for the whole Australian dairy industry,» Ms Britnell said.
«It’s symbolic at the moment of the tipping point from farmer owned and farmer influenced, into multinationals who don’t have as great an investment in farming and the future direction of the Australian farming industry.»
Concern at the prospect of the country’s fourth largest dairy company falling into foreign hands triggered a recent turnout of dairy farmers in Warrnambool.
Lorraine Robertson, a dairy farmer from Warrnambool, says she is passionate about the Australian dairy industry and wants it to stay local.
Bernard Lubitz, a farmer from South Gippsland, says accepting the Saputo offer would be «surrender».
«That’s just like a white flag saying we’re surrendering. We don’t care about our future. We don’t care about the assets that we strive for. Our industry’s for sale,» he said.
Farmers call on ACCC to allow local takeover
What worries Australian dairy farmers most is how their industry is shrinking.
Ten years ago, Australia and New Zealand each produced 11 billion litres of milk a year.
Since then, New Zealand, led by its farmer cooperative Fonterra, has expanded into Australia and doubled production to 20 billion litres.
The Australian industry meantime has fragmented and shrunk by a quarter.
«We need one big co-op,» Mr Lubitz said.
«Our opposition is New Zealand. They’re here. They play hard. And we have to fight against them.»
They say this would require an Australian bidder taking over Warrnambool Cheese and Butter, so it can take on the global giants.
Australia’s biggest dairy exporter and farmer coop Murray Goulburn has matched the Canadian’s bid and claims dairy farmers need their own all-Australian champion.
Mr Helou says there are too many processors in Australia that are «sub-scale».
«Being a dairy cooperative owned by farmers, it’s our ethos, it’s our central theme to maximise milk price so basically we distribute all of the profit back to the farmer-owner through the milk price,» he said.
The big handicap for Murray Goulburn however is last time it suggested merging with Warrnambool, the ACCC said it would not allow it as this might cut competition for dairy farmers’ milk in the district and possibly the price they are paid.
But many dairy farmers disagree.
«Murray Goulburn do set the milk price in Australia,» Ms Britnell said.
«I think the ACCC have got it wrong. So my message to government is back off out of the way and support us so we’ve got an environment around us to be globally competitive.»
Canadian takeover has Government blessing
This time around Murray Goulburn will challenge the ACCCÂ in a direct approach to the higher Australian Competition Tribunal.
«If Saputo from Canada take over it’ll be a foreign owned, small-scale business that is there for the financial benefit of the shareholders back in Canada,» Mr Helou said.
«They’ll be looking at minimising milk prices to maximise their own profit.»
The Canadians however have succeeded in wooing some local dairy farmers, many of whom, like John McConnell, are also shareholders in Warrnambool Cheese and Butter.
«Now I heard Saputo, he sounded exciting,» Mr McConnell said.
«He had a vision for the future. And he’s got me very tempted.»
Saputo has also won the new Federal Government’s blessing, along with that of the Warrnambool board.
Mr Lord says if a foreign investor is prepared to put money on the table to expand Warrnambool’s infrastructure, that is a positive thing for shareholders.
«And I think it’s a positive thing for the industry at large,» he said.
The Competition Tribunal’s decision on Murray Goulburn’s bid will take a minimum of three months.Â
Warrnambool directors have recommended shareholders accept the Canadians offer while it is still on the table.
If they do, another slice of a growing Australian industry will float off into foreign ownership.
«The world is hungry,» Ms Britnell said.
«They are going around the world and looking at where good food producers are and trying to get a stake in the game. It’s all about long term policy, food security.
«And we in Australia are not thinking about the vision for Australian agriculture and getting our best position ready.»
Source: Yahoo
