SOUTH Australian dairyfarmers who supply Lion have been told that not all of their milk will be needed next year as the company cuts its supply by about 65 per cent, from 280 million litres to 100mL.
The cut - announced at supplier meetings held at Keith, Meningie, Murray Bridge, Mount Compass and Tanunda last week - follows the sale of the cheese manufacturing plants at Murray Bridge and Jervois to Victorian company United Dairy Power in October.
Milk from Lion suppliers and the percentage it buys from Dairy Farmers Milk Cooperative will only go to Lion's Salisbury site for fresh milk processing.
Lion agricultural procurement director Murray Jeffrey said the company did not know how many dairyfarmers it would be dropping, but would be having one-on-one meetings with suppliers early next year to determine who to retain.
"We have a selection criteria that we will work through which will be based on milk supply that will suit our flat line production, as well as a history of good quality," he said. "Depending on whether the supplier wants to stay within our business or go elsewhere will depend on what numbers we end up with."
But Mr Jeffrey conceded selecting suppliers would be region specific, meaning farmers further away from the Salisbury plant would be disadvantaged.
"Our idea will be to have farmers who are closer to our plant, which will be part of our selection criteria," he said. "That doesn't mean we are going to focus on one area, because we'll be looking at different areas closer to the factory."
Mr Jeffrey said the meetings had been mostly well-received by farmers - except for some disappointment from farmers further away from Adelaide, such as the Upper South East - but there was plenty of supply options around for dairyfarmers.
"We're saying to our suppliers very openly to go out and do their homework, explore different options and to make their own choice."
Mr Jeffrey remained optimistic for SA dairyfarmers, saying it was an exciting time for suppliers with a new entrant - UDP - to the industry and a lot of choice in Warrnambool Cheese & Butter, Murray Goulburn and Parmalat.
With UDP set to take over Murray Bridge and Jervois sites on January 30 next year, general manager Darryl Cardona said the company would be willing to pick up Lion suppliers because they were looking to grow intake through the sites from about 140mL to more than 300mL.
In a surprising yet promising twist for the industry's growth, Mr Cardona said UDP had received interest from some farmers wanting to re-establish old dairies in the Lower Murray and Lower Lakes area.
He said they had fielded interest from more than 20 farmers in SA interested in supplying UDP, not all of which were Lion suppliers.
"There has probably been about two-dozen suppliers we have spoken to at the moment and there have also been some farmer representative organisations we have been talking to," he said.
*Full report in Stock Journal, December 8 issue, 2011.
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