Dairy rebate's high hopes

Tasmanian Dairy Products (TDP), based at Smithton, Tas, officially announced the Next Generation Dairy Rebate yesterday at its factory on the State's north-west coast.

New, young or existing suppliers looking at investing money in infrastructure or expanding their operation will be eligible to receive the rebate.

TDP, which is jointly owned by co-operative Murray Goulburn (MG), said the company's rebate offer followed on from MG's Next Generation initiatives announced last year.

"Basically it's an assistance package to support new entrants, young farmers or existing farmers - or anyone who wants to expand their business or invest capital into infrastructure," TDP chief executive officer Tony Catania said.

"It is for people who want to buy more cows, build a new dairy or even invest in water rights."

He said the rebate offer was dependent on strict criteria.

"The capital investment must be $100,000 or more and the farmer must make a commitment to supplying TDP for three years," Mr Catania said.

The rebate was also reliant on the amount of capital spent.

"The money will vary on individual cases," he said.

"We will sit down with the farmer and use a methodology to work out how much extra milk their investment is going to produce - and then the rebate will be paid in addition to their monthly milk cheque.

"We've had great interest from farmers."

Mr Catania said TDP had been operating for only 18 months but had reached 60 per cent capacity (of a possible 300 million litres annually), with the aid of 70 suppliers.

"We have 40pc that we still need to grow into," he said.

"We are hoping this rebate will help."

The rebate package also links into the Tasmanian dairy industry's sustainable growth project, Filling the Factories, that aims to lift production levels to 1150 million litres by 2017.

DairyTas executive officer Mark Smith said incentives such as TDP's rebate package would play a role in growing the industry because it would remove some of the financial pressure of entering the industry or expanding.

"There is a lot of competition here for milk and I wouldn't be surprised if other companies such as Fonterra or Lion offer their own incentives for growth too," he said.

Apart from developing existing farms, the Filling the Factories project also relies heavily on dairy conversions, which have not been happening at a fast enough rate to reach growth targets.

"In terms of uptake, conversions have been slower off the mark than we hoped," Mr Smith said.

"That is understandable, though, because we've come off a tough season in 2012-13."

However, Mr Smith said he was expecting interest to grow as confidence returned.

"Production has picked up this season; we are ahead of last year by 1pc year-to-date and we are the only region in the country in that situation," he said.

"As of the end of last February, we were 7.9pc - and we are on target for 2pc growth by of end of the year."

However, Mr Smith said that was still "well behind" the project's annual goal of 5-10pc on an accumulative level.

"We should get that next year, unless the season turns bad," he said.

"I expect to see more cows around - there might not be a lot of new conversions but we will see that increase on existing farms."

Another barrier to dairy growth was the lack of outside investment, he said, but the industry aimed to make some big inroads this June.

TasDairy has plans to undertake promotional work in New Zealand, pushing the benefits of dairying in Tasmania.

"We will have a presence at the biggest agricultural field days in NZ, Mystery Creek, this June," he said.

"We want Kiwis interested in investing in Tasmania.

"The facts are you will make more money dairying here than anywhere else; we have competitive land prices and water availability - and there's a huge demand for our milk."

But while dairy farm sales had waned, signs were starting to point to positive movement on the market.

"We've been through a quiet period but activity is picking up," Mr Smith said.

He said investors needed to base their decisions on a number of things but the potential to make money was there.

"You only need to look at the results of our recent Dairy Business of the Year awards, where the top farmers achieved a 5pc return on assets in a very tough year," he said.

"Not everyone made money, but it highlights what good farmers are achieving and that the scope is here to reach that goal."