Shares in Australian Dairy Farms have soared after the dairy farm operator said it is planning to produce organic infant formula for Australian and overseas markets.
Australian Dairy Farms intends to convert its six Victorian dairy farms to organic production in the first step of the plan, which the company hopes will transform it from a minor player in the highly competitive conventional milk market to a major player in organic food products.
"The initiatives are a first significant step in making the company a major player in producing and distributing organic premium-quality branded food products," Australian Dairy Farms chief executive Peter Skene said in a statement on Monday.
Shares in Australian Dairy Farms closed 7.5 cents, or 68.2 per cent, higher at 18.5 cents, after peaking at 25 cents.
The company expects to convert all of its 3,600 acres to organic production, which will make it the largest single-owned organic dairy farming operation in Australia.
Aside from its six dairy farms in Victoria' south-west, Australian Dairy Farms also owns a milk processing facility, the Camperdown Dairy Company, which is capable of producing specialist products.
The board of Australian Dairy Farms has started planning of a new wet- blending spray drying plant and a pharmaceutical-grade tinning and labelling facility for production of the infant formula.
The company said prices for non-organic milk have been falling since the industry deregulated in 2000.
Australia's organic milk pool is estimated to be only 40 million litres per year, and Australian Dairy Farms could add significantly to that given that its current annual milk volume is around 17 million litres.
The market for organic infant formula in Australia and New Zealand is expected to grow from $US169 million in 2017 to $US400 million by 2023.
