Conventionally, one would expect equity capital to pour into these high margin businesses rather than into the low margin activity of making more milk. Unbundling the downstream return to the farmer from the cheque for raw milk has been one signal, albeit informational rather than effective. Charging farmers an entry fee for additional supply that at least covers part of the cost of additional basic processing facility the extra supply requires, is another. But in itself that doesn't redirect industry capital to value-added endeavours. In total though the industry is a contradiction.
Farmers can only raise their income by pumping more milk.
Yet the industry would do better by having less investment in raw milk production and greater investment in downstream value-add. That's the guts of the need to rationalise. There are 3 possibilities. The obvious one is that if farmers don't want outside shareholders then they need to leave far more of the industry revenue in the downstream businesses so it can be invested. That possibility is fantasy.