That’s the question United Dairyfarmers of Victoria president Adam Jenkins is pondering after Warrnambool’s Midfield Group announced a joint venture with Dutch giant Louis Dreyfus Company (LDC) Dairy Asia to help run its new Penola plant.

Mr Jenkins, a South Purrumbete farmer, welcomed the venture but did so with a hint of caution.

“I think when anyone is willing to invest that sort of money it bodes well for long-term confidence in the industry,” he said.

“And for farmgate price competition, it is not a bad thing.

“The question yet to be answered is will farmers extract value out of it long-term?”

Macarthur farmer Craig Dettling said the joint venture showed both parties had confidence in the future.

“Midfield are wanting to target new milk, not taking it off others,” Mr Dettling said.

“Louis Drefyus are a pretty big trading outfit.

“It is going to link Midfield with a lot of markets, and that does seem to be where the Australian dairy industry is going.”

He said investment in new processing capacity was required, as a lot of the plants needed upgrading.

“There is capacity there, but is it the right capacity?” Mr Dettling said.

The Penola plant, due to begin operations in about 12 months time, is expected to produce skim milk powder, whole milk powder and products for domestic and overseas markets.

At the moment, plants like Warrnambool Cheese and Butter could not take any more milk and “freight is a killer” on product from South Australia, going to Victorian factories.

The Penola plant is expected to have an annual processing capacity of 220 million litres of raw milk.

Midfield Group managing director and owner Colin McKenna on Thursday said the joint venture combined Midfield’s expertise in dairy farming and processing with LDC’s global reach.