AUSTRALIAN Dairy Plan chair John Brumby says Dennington's Fonterra plant shutdown is a "perfect example" of what he intends the national industry plan to address.
Dairy Australia says milk has flowed from the south-west to "under-utilised, modern milk processing facilities" in northern Victoria, which would include Fonterra's Stanhope facility, increasing competition on older local plants such as Dennington.
While western Victoria has experienced relatively stable milk flow, northern Victoria's milk production has dropped from 3.3 billion litres in 2001-2002 to possibly as low as 1.5 billion litres this financial year.
Fonterra last week announced its Dennington factory would close in November with a worker at the time telling The Standard the factory had been operating about 30 to 40 per cent capacity.
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Mr Brumby said "a perfect storm of events" nationally, including drought, rising costs for farmers, and declining supply for producers were among reasons for milk flowing from south-west Victoria to plants in other regions.
"Investors who have made decisions need to secure volume to maintain their plants, and so you are seeing examples of this occurrence, where milk is being transported large distances because volumes are shrinking," he said.
The former premier is chairing the Australian Dairy Plan, which will set national priorities in the embattled industry.
Mr Brumby said he wanted to see the Dennington factory "employing locals and processing milk at high levels" again.
"But, that is only going to happen if the fundamentals are right, because the milk volumes are there," he said.
"You've also got to let the market work, it's not for government to determine when and where plants should operate."
Mr Brumby said the five-year plan, to be released later this year, would restore profitability and confidence.
"We don't manufacture much in Australia anymore. It's one of the the few industries that we actually make something."
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