The decision by Murray Goulburn Co-operative to close its Leitchville milk processing plant was as inevitable as it was devastating for the town that has lost its major employer.
At the start of this decade the northern irrigation region was the dairy industry’s star performer with milk production peaking in 2001-02 at more than three billion litres or just over 40 per cent of total Victorian production.
That was when Murray Goulburn accepted the chance to buy the Leitchville cheese plant built and operated to that time by Kraft.
The additional plant solved capacity problems for MG which had been seen its intake increasing at an annual five per cent and more over the previous five years, in part due to the hugher output from individual farms but also as they took on many disillusioned supplies from the ailing Bonlac Co-operative.
But since then it has been all downhill with successive droughts and reduced irrigation allocations taking a massive toll.
Many farmers have been forced to cut cow numbers and perhaps more importantly to cease milk production – all too often selling off the water entitlement which effectively removes the option to move back into dairy if conditions improve.
Dairy Australia figures confirm that production in the region slipped below two billion litres by 2007-08 and lost a further 4.5 per cent (90 million litres) in 2008-09.
But even those figures were buoyed in part by record milk prices and that bubble burst spectacularly in late 2008 when international prices recorded their fastest ever fall in the aftermath of the global economic crisis.
As factories adjusted farm-gate prices the Dairy Australia situation and outlook survey revealed that half the remaining farmers in the northern region intended to make fundamental, long-term decisions about whether to continue dairy farming in a system that required them to depend on bought in feed for at least part of the year.
That has produced a further, sharp drop in production with factory intake in the first five months of the current season, including the traditional spring production peak, down a further 13.4pc on year earlier figures.
If that trend continues to the end of the season then milk production in the northern region would be back to about 1650 million litres or little more than half the peak of a decade ago.
What Murray Goulburn has had to concede is that there is nothing to suggest those figures will improve any time soon, triggering the decision to close and ‘mothball’ the Leitchville plant.
Figures from its annual reports confirm that MG has been the big loser from the drop in northern production with 3.3 billion litres of total milk intake last year almost one billion below the peak in 2001-02.
MG managing director Stephen O’Rourke in announcing the Leitchville decision was quick to reaffirm their commitment to the north which he said still provided about 20pc of total national milk production.
But with three other plants in the region (Cobram, Rochester and Tangambalanga) he said the Leitchville decision was unavoidable but necessary to ensure its operations in that region remained efficient and competitive into the future.
*Extract. Full report Stock & Land February 11.
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