So far this year four farmers have been told by processor Brownes their contracts would not extend beyond September, and five other farmers contracted to Parmalat-owned Harvey Fresh have until January to find a new home for their milk.
One of the largest dairy farmers in Western Australia is contemplating his future in the industry, which is struggling to adjust to the impact of a global oversupply of milk.
Former Australian Farmer of the Year Ross Woodhouse, who milks 3,200 cows and produces 18 million litres of milk on his Scott River farm, is looking at options outside of the dairy industry.
Mr Woodhouse is contracted to Brownes and has been receiving up to 54 cents per litre for his milk.
But that is about to change.
The processor has contacted all of its suppliers to inform them returns will be reduced to 45 cents per litre across the board.
It is not just the falling milk price that has Ross Woodhouse thinking about his future.
“Our situation is probably a little bit unique,” he said.
“We could probably achieve 45 cents cost of production but we’re highly geared; we have a high level of debt and it’s what will happen in the immediate future.
“It’s not just right now with the milk price, it’s what will happen in two or three years’ time and is the business sustainable for us.
“We’ve done the sums on 45 cents and it’s shown a significant loss and certainly we can carry that for a year or so but looking into the future if we continue then we’re going to raise our capital base and be in a very dangerous position from an equity point of view.”
Mr Woodhouse said he wanted to decide his own future, not the banks.
“All of the 28 years I’ve been in dairying has basically been debt-driven and risk-taking and you reach a point where you think ‘Is it worth going on further?’ with a view to perhaps eroding your capital base and then being sold up so you end up being thrown out the gate of your farm with very little dignity,” he said.
Mr Woodhouse said he had 7, 000 cattle and will end up with 8,000 by the end of June next year, so he will need to make a fairly rapid decision about his future to take advantage of the high cattle prices.
“That’s our greatest asset, by selling the cattle we can retire our debt and exit with some dignity,” he said.
“I would expect we’ll have to make a decision one way or the other in the very near future, probably two months’ time.”