The Allansford processor yesterday announced an incentive scheme, to run over four years, giving suppliers extra cash for every litre of extra milk produced.

“We want our suppliers to produce more milk to allow expansion of our markets,” chief executive David Lord said.

“This partnership recognises the costs farmers face in growing their production — it’s a way for the company to share in those costs.”

Farmers will receive incentive payments on all production above their average output over the past two years.

They will receive six cents per litre (c/l) for the first year, 4c/l for the second year, 2c/l in the third year and 1c/l in the final year.

The incentive, averaged over the four years, amounts to three-and-a-quarter cents per litre.

Mr Lord said 75 per cent of the first year’s incentive would be paid up front, based on the anticipated production increase.

Mr Lord said a farmer increasing production by a million litres would receive $60,000 in the first year, with $45,000 of that paid up front.

Adding a million litres would typically be equivalent to milking an extra 150 cows.

The incentive applies to growth by any means, whether it is achieved through buying more land, increasing herd size or boosting cow production.

WCB is holding a series of meetings with suppliers this week to explain the new scheme.

The scheme is the latest development in an intensely competitive milk market.

Bega Cheese has already offered a lucrative incentive for farmers to lock in supply.

Last week, the Australian Dairy Farmers Co-operative teamed up with Colac-based Bulla Dairy Foods for a push into the south-west supply region, putting even more pressure on the available supply.

Murray Goulburn has already declared its ambition to gain milk in the region to supply an infant nutritional powder plant being built at Koroit, while Fonterra also wants more milk to meet its new contract to supply Woolworths home brand milk, which will be processed at the Cobden factory.

WCB will also announce a price step up this week of 10 cents per kilogram butterfat and 25 cents per kilogram protein, taking its farm gate price to $6.85 per kilogram of milk solids, with one more price review to come before the close of the season.