In August, Victoria will have a new cheese manufacturer as Australian Consolidated Milk starts producing cheddar and Mozzarella curd at its Girgarre factory.
The addition of cheese production will optimize milk solids yield at the factory, increase manufacturing efficiencies and - most importantly - diversify ACM's product range, managing director Michael Auld said.
Cheese will be produced alongside cream, milk powders, butter and farm fresh milk, mostly sold in the domestic market to manufacturers of retail products and for food service industries.
Producing a range of products for different customers helps diversify business risk and cushions dairy farmer suppliers from pricing volatility, Mr Auld said.
"Cheese production gives us another option and it's a market that is traditionally less volatile than other dairy ingredients," he said.
"The cheddar cheese market appears to enjoy similar customer purchasing habits as those buying liquid milk from ACM.
"This is expected to help keep the cheese price relatively stable for us compared to the volatile export dairy commodity markets."
Mr Auld said price stability underpinned ACM's business model.
"If we had a narrow market or product focus, ACM pricing would ride the highs to the top of the market cycle and the lows right down to the bottom and this would be reflected in volatile farmgate pricing," he said.
"We don't think this is the best model for long-term sustainable profitability."
"Cheese helps us maximise the value of our solids by balancing our protein across the streams.
"For example, powder requires less protein and cheese requires more protein.
"So, by having both we are in balance for protein and therefore there's no need to bring other products onto the site such as lactose."
ACM will increase its factory workforce by 15 per cent to 60 employees when the cheese portion of the factory is fully operational in August.
Cheese production is expected to increase gradually during the next 12 months, with ACM aiming to increase its supply into the relatively stable domestic cheese market.
At its peak, the plant will be able to produce a total of 20,000 tonnes of cheese a year.
"Cheese is an important step towards maximizing the value of the 500 million litres of milk that ACM receives annually from our 380 dairy farmer suppliers," Mr Auld said.
ACM's Girgarre factory has been operating for 15 months with the range of products produced helping to deliver farmgate milk price stability.
Soren and Nicole Christensen, who milk about 400 cows near Traralgon in Gippsland, have supplied ACM for two years.
"ACM are consistent, they don't say one thing and then do something completely different," Soren said.
"We need consistency for our business, security of an opening price which is stuck to and increased if they can."
Toolamba suppliers Suzie and Stuart Rea milk up to 800 cows in Victoria's Goulburn Valley. They have appreciated ACM's "personal touch" and how the milk processor relates to its suppliers.
It shows they are committed to the industry, Suzie said.
ACM's secure farmgate price and honesty also helped the Rea's plan during recent dry seasons.
"At least with ACM they were committed to the price and didn't hide behind smoke and mirrors," Suzie said.
"If they can give you more, they will. But it enables us to budget and put a contingency in place."
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