Oz dairying attracts big-ticket buyers

And dairy processors have spent tens of millions of dollars on new and upgraded plant. 

Investors are also getting into dairying. Gerry Harvey, the Harvey Normans boss and one of Australia’s richest people, is to invest up to A$80m on an intensive dairy operation near Shepparton, Victoria, indicating greater confidence in dairy’s long term viability.

 This follows the news that Beston Global Food Co has bought the remaining assets of United Dairy Power (UDP), concluding a busy half year for corporate dairy investors, many previously outside the industry.

External capital will form a large part of Murray Goulburn (MG)’s new capital structure, much in the news recently. 

The target date for the unit trust to be listed on the ASX was July 3, listing at A$2.10 per unit. Unitholders will have exposure to MG’s business but will not have voting rights in MG or its operations. 

Saputo-controlled Warrnambool Cheese & Butter (WCB) lifted its presence in consumer branded cheese by buying the ‘everyday cheese (EDC) business’ of Kirin-owned Lion Dairy & Drinks (LDD). 

The EDC business cuts and wraps cheese made by WCB and sold under ‘everyday cheese’ brands Coon, Mil Lel, Cracker Barrel and Fred Walker and others. Saputo entered the Australian industry in late 2013 when it won a bidding war for control of WCB.

United Dairy Power (UDP) was put into administration in late April after its receivership last year. MG bought the Caboolture cheese brand and reportedly will move the cheese cut-and-shred equipment to its Cobram site. 

Burra Foods picked up UDP’s milk depot at Poowong. Initially, no buyers were found for the South Australian processing plants at Murray Bridge and Jervois. But these were recently bought by Beston Global Food, Adelaide. It will upgrade the factories, raise production capacity and make new products for Asian markets. The factories are scheduled to re-open in September. 

Meat processor Midfield Group, as announced, will build an export milk powder plant at a former McCain potato factory at Penola, in southeast South Australia. Likely start-up date is July 2016, first with 160m L/year. The company has approval to build another powder plant and to enlarge cold storage at Warrnambool, but building will wait until the Penola facility is operating. The two plants will cost about $130m. 

Other wealthy Australians are also buying in at farm level. Pending official approval, Moxey Farms will be bought by the Australian Fresh Milk Holdings consortium (AFMH), made up of Leppington Pastoral Co, New Hope Dairy and Freedom Foods. The Moxey family will keep running the operation and will buy a strategic stake in AFMH.

Growing processor Australian Consolidated Milk (ACM) and Thailand’s Dutch Mill intend to buy farms and lease them to proven dairy farmers unable to afford their own properties. 

The joint venture is aimed at broadening ACM’s supply base, while allowing Dutch Mill to source milk from ‘accredited farms’. ACM produces UHT milk at Shepparton via Pactum Dairy Group, a joint venture with Freedom Foods. 

European pension fund-backed Ace Farming recently added two farms in northern Victoria to its holdings, and ASX-listed Australian Dairy Farm Group plans to raise up to A$17.7m to buy three more farms in southwest Victoria, doubling its milk production. The company presently owns four farms.

With the major processors opening the 2015-16 season with milk prices at A$5.60/kgMS and flagging a close of about A$6.00/kgMS for the third consecutive year, there may be more big ticket announcements.

• Amy Bellhouse is industry analyst with Dairy Australia.