Gippsland - How Now Gippy Now - April 2010 Edition
Dairying accross the world
Global milk production is estimated to be 560 billion litres of cows’ milk per year with the major items of trade being butter, cheese, milk powders, casein and condensed milk.
The major cow milk producers include the European Union, North America, Russia, India, China and Brazil.
Despite the ocean of milk, the international market is actually quite thin with amounts being sold equating to just seven per cent of worldwide milk production.
Most countries around the world have some form of dairy industry and this has influenced many governments to actively protect their industries from competition through subsidies, high tariffs and other support.
While Australia accounts for an estimated two per cent of the world’s milk production, it is an important exporter of dairy products. Australia ranks fourth in terms of world dairy trade – with a nine per cent share – behind the European Union, New Zealand and the US.
Australian exports are concentrated in Asia, which represent 71 per cent of our total dairy exports value of A$2.9 billion in 2008/09.
In this market, Japan is the single most important export market for Australia, accounting for 19 per cent of exports by value.
Why does it matter? Our annual exports run in the order of 900,000 tonnes of processed dairy products being shipped to over 100 countries.
To crunch a few more numbers, our local industry now sells roughly 45 per cent of its annual production to world markets and earns more than A$2.9 billion in export revenue. So it’s no surprise that Australian farmgate prices correlate strongly to export returns. In that equation, it worth remembering there is no regulation of price paid to farmers, hence it is totally market driven.
It is also important to remember that company-specific factors affecting farmgate milk prices. Each individual milk processors will offer different quality payments or penalties, seasonal incentives, volume charges and/or rebates, and incremental growth incentives.
Where is the market at? Internationally, a tightening supply and demand balance has seen spot prices for the major dairy commodities increase by around 80 per cent in US dollar terms over the past 12 months. However, the strengthening Australian dollar has limited export returns, with Australian denominated prices increasing by just 30 per cent. The start of 2010 has seen commodity prices soften, as the northern hemisphere approaches its seasonal peak and rising prices test demand.
Recent developments in milk prices and major input costs suggest that the Australian dairy industry has some grounds for cautious optimism in the coming months.
For more information, please contact michael harvey on 03 9694 3873. or email mharvey@dairyaustralia.com.au
