Drought leads to butter shortage in Western Australia

Situation will not be quickly resolved: "I do not see this fixing itself in a hurry. One of the things that is happening in the Murray-Darling system in particular, but in irrigation areas on the east coast generally, is that dairy farmers in Victoria have been forced to cull herds due to the water shortage…the shortage of water means that as water falls due for reallocation, and because we are now on tradeable water entitlements, it is far more likely that the available water use will be taken up by people who have the potential to make the highest economic benefit per megalitre of water. That will not be dairy farmers, who rank among the lowest efficiency users of irrigation water.

Deregulation has led to decrease in WA dairy production: (Concerning expanding the Western Australian dairy industry) "…since deregulation, our own industry has contracted, but not as a result of a shortage of water…we have the capacity to double our dairy production at least, without increasing our dairy production area by a single hectare… (However), we are such a small part of the total Australian production that we will not make a huge difference to Sydney and Melbourne’s industry. Western Australia’s total production share of the Australian dairy industry is only about four per cent…(but) we have some significant capacity to make life a lot better for Western Australian dairy farmers.

Prices need to move higher: "…Everything is a function of price. We can lift production, but only if the price signals are right. We are now enjoying in the dairy industry the highest prices since deregulation. However, they are still in the order of only the mid-30c per litre – somewhere between 34c and 37c depending on the producer. Bearing in mind that prior to deregulation in 2000 a domestic entitlement milk producer was getting over 50c a litre, it is still not a terribly high price, but it is much better than what they have been getting. If we see prices moving upwards of 40c a litre and dairy farmers get a sense of confidence that those prices can be maintained, we will see an increase.

Industry would need to double if exporting considered: "For Western Australia to become an effective exporter of dairy material, however, we need to aim for a minimum production of 800 million litres per annum, and our production is well under 400 million litres. We would have to more than double our industry before we could say we were even at the entry level of being a serious dairy exporting state," said Chance.

Reference: Kim Chance, Leader of the House, Legislative Council, Western Australia, 25 October 2007.

Erisk Net, 9/11/2007

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