Fonterra, the world’s biggest dairy exporter, has temporarily shelved plans to spend $10 million upgrading its Wynyard cheese factory in northern Tasmania.

The decision has come in response to concerns about the economic environment, although Fonterra’s MD, Bruce Donnison, remains confident of a turnaround in dairy fortunes in the future.

“This recent crisis that we’re in around credit, and the demand drop off as a result, is definitely reflecting on our farmers and how they perceive their business,” Mr Donnison told the ABC. “But ultimately I’ll be looking for more milk to fill up the capacities that we have here in Tasmania, and potential for future redevelopment.”

Mr Donnison said that Fonterra remains committed to their plan to boost milk production in Tasmania by about 20 per cent to 500 million litres.

The news comes at a time when dairy prices are tumbling and uncertainty is weighing on the dairy sector. In more positive news for the industry, the dairy category recorded the greatest growth rates of any grocery sector last year, according to Nielsen data released this month.

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