Wattle Health Australia plans for organic infant milk formula to pressure dairy market
Wattle Health Australia’s expansion plans for milk formulas is likely to put pressure on the supply of organic milk.
WATTLE Health Australia’s expansion plans for producing adult and infant milk formulas may put pressure on the nation’s supply of raw product.
Supplies of organic milk in Australia may come under pressure if WHA’s rollout of infant formulas eventuates within three years.
Through its joint venture with Corio Bay Dairy Group, WHA plans to move from processing 14 million litres of organic milk in the first year of operation after its new spray dryer is commissioned in May to 34 million litres in year two and 46 million litres in year three.
CBDG chief executive and WHA managing director Tony McKenna said the group planned to move to the spray dryer’s annual capacity of 60 million litres by its fifth year of operation.
WHA has a 45 per cent stake in CBDG with Niche Dairy owning 5 per cent and Organic Dairy Farmers of Australia 50 per cent.
ODFA’s contribution to the joint venture is supply of organic milk.
It has the largest pool of organic milk in Australia — 40-45 million litres. Another 20 million litres is going through the three-year conversion process to be certified organic.
Dr McKenna said ODFA had been contracted to supply 46 million litres — the whole of its current supply — within three years from the organisation’s membership base of about 50 farmers.
He conceded that might put pressure on other ODFA customers, such as Lactalis, Bellamy’s Organic and organic yoghurt manufacturer five:am.
But he said there was enough time and flexibility in the contract with ODFA for the organisation to build further supply.
“That’s part of the ODFA’s focus,” he said. “It (the joint venture) is going to change the market for organic dairy farmers.”
Dr McKenna said the contract with ODFA is for perpetuity and set minimum volumes for the first three years of supply.
Negotiations on volumes beyond the first three years would begin towards the end of the third year contract.
“They’ve got to make sure we are the right option for them,” he said.
He said that under the existing contract, there was an annual review of organic milk prices that took into account factors such as international dairy returns.
“But we want to ensure there is a return to organic dairy farmers,” he said.
CBDG lowered its spray dryer into the tower in the North Geelong factory two weeks ago.
Dr McKenna said WHA and Niche Dairy funded the construction of the spray dryer and working capital — costed at $70 million — through secured loans.
He said there was scope to install a second dryer if the first was nearing capacity. That would double the annual capacity of the plant to 120 million litres of organic milk.
Dr McKenna said WHA had plans to segregate out organic milk containing the A2 protein for processing into dairy products during the year.
● Peter Hemphill’s family have shares in Wattle Health Australia
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