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Milk processors close excess capacity
14 Jun 2005
By addressing overcapacity and inefficiency that are the legacy of milk market regulation, dairy companies hope to create a leaner, more profitable industry with pricing power to stand up to the big retailers. Under the old milk price regime, processors operated scores of small, inefficient regional plants. But once government control of farm gate milk prices was removed, it became clear that the most efficient model was to have large plants close to the main points of sale. Not all processors made the switch straight away. NSW co-op Dairy Farmers waited until this year before deciding to shut three of its more inefficient plants. Fonterra may close more of Bonlac’s plants this year. And with the drought cutting annual national milk production by about 1.5 billion litres to 10 billion litres, processors may have trouble employing even their remaining capacity for some years.
The Australian, 11/06/05
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