The plant, a joint venture between the Midfield Group and the global Louis Dreyfus agribusiness company, is also offering dairy farmers no milk price claw backs, another move that would be welcomed by south-west dairy farmers savaged by last year’s milk price cuts by dairy processors Murray Goulburn and Fonterra.

The plant, which has been called the Union Dairy Company, said its guaranteed minimum price was likely to be an average of the opening price of the three major south-west dairy processors plus a volume premium payable from the start of the season.

Union Dairy Company (UDC) managing director Daniel Aarons said UDC had adopted its style of payment because it believed it could not push any “shortfalls” by UDC back on to farmers.

Mr Aarons said UDC was close to getting the 200 million litres of milk it wanted to secure from farmers in its first year of operation but was still seeking more farmers to supply it.

The company hoped to ramp up its operations to receive 300 million litres of milk in its second year, he said.

Mr Aarons said the milk supply that UDC had secured had previously been supplied by farmers to a range of dairy processors and had not been switched from a few processors.

“We are getting interest from all suppliers to all processors,” Mr Aarons said.

He said the plant expected to draw half of the 200 million litres it wanted from western Victoria and the other half from dairy farmers in South Australia.

The plant will produce skim milk powder, whole milk powder, anhydrous milk fat and fresh cream with a production goal of 25,000-30,000 tonnes of milk powder in its first year.

Mr Aarons said Midfield’s partnership with the Louis Dreyfus agribusiness company was going very well and all of the powders to be produced at Penola had been sold to export markets.

Mr Aarons said about 85 per cent of the new plant had been built. 

The company still intended to build another milk powder plant at Warrnambool in the future, he said.