An unusual bid to produce milk powder using energy generated from coal could see Western Australia export 30,000 tonnes of milk to growing dairy markets in Asia.
A $650 million milk powder production and export plan is canvassed by the Department of Agriculture and Food WA in a pre-feasibility study into ramping up dairy exports to Asia.
In an early sign of private sector interest, Griffin Coal has proposed harnessing the energy generated from its mines 10 kilometres east of Collie to fuel a milk powder processing plant on the adjacent land.
China-owned Premier Coal has also indicated an interest in supplying energy for the project.
There has been much speculation recently about potential Chinese investment in the WA dairy sector.
Collie is one of three potential sites for a processing plant identified in the study, alongside Busselton and Dardanup.
Griffin, which is owned by Indian conglomerate Lanco Infratech, has held informal talks with the Department of Agriculture and Food Western Australia on the proposal and says it could also provide the water required for a processing plant through its mine dewatering operations.
Lanco executive general manager project development David Trench said the concept presented an opportunity to capitalise on strong demand from Asia for quality food products.
“If you just looked at Western Australia producing for Western Australia, I think you’re on a short run,” Mr Trench told Business News.
“If you just look at India and China: that’s 2.3 billion, look at Indonesia: that’s 250-plus million. You’re looking at 2.6 to 2.7 billion people that are a potential target market.”
The Barnett government has strongly advocated positioning the state as a “food bowl” for a rapidly-growing middle-class population in Asia.
DAFWA said its modelling indicated there was potential to increase the state’s milk production by at least 250 million litres per year in four to five years, up from about 350 million litres per annum, through the new development of new dairy farms, without any adverse impact on the sector.
The study found WA offered a number of strategic advantages over other areas as a location for dairy production, including suitable land mass, access to large amounts of fodder and grain and expertise in food exports.
“World consumption of dairy products is increasing at around 18 billion litres of milk a year with much of the demand from Asia as a result of changing eating habits, sound economic growth and increased population,” DAFWA said in the report.
“The current Western Australian dairy sector is mainly focused on producing fresh milk for the domestic market but the scope for increased milk supply for exports is now available under an alternative model.
“Growth based on export markets in Asia is a key to a more sustainable future. This will require significant commercial investment along the supply chain including farm production and innovation, manufacturing and market development.”
Mr Trench, who is also chairman of the federal government’s Regional Development Australia committee for the south-west, says the milk powder plan would have the flow-on effect of assisting local dairy farmers who have struggled in the wake of a milk pricing war between the major supermarkets.
“You have a dairy industry that’s been struggling to survive and thrive in the current market environment and that’s been less than competitive,” Mr Trench told Business News.
“All of a sudden you have an opportunity where it could be extremely competitive but not for local consumption.
“It becomes a regionally transformational project because people will be employed and farms that were once looking a bit loose around the edges can probably be firmed up.”
The study also proposed an alternative option to produce and export 100 million litres of bulk milk at an indicative capital cost of $195 million.
Mr Trench declined to comment on reports Griffin Coal was at risk of being wound up as a result of a $13.9 million tax debt.
The matter is due to appear before the Federal Court on August 6.
