Australia remains among the most competitive milk producers
Source: dairynews.today
Despite the global increase in costs over the past five years, Australia continues to excel as one of the most efficient exporting regions, according to Rabobank.
Australia continues to be one of the most cost-competitive milk producers, despite a global increase in milk production costs over the last five years, states a report by Rabobank.
The report, titled "The Cost of Milk: Analysis of Milk Production Costs," highlights a 14% increase in average total milk production costs in eight key export regions—Argentina, Australia, China, Ireland, New Zealand, Netherlands, California, and the Upper Midwest of the US—equivalent to an additional US$0.06 per liter between 2019 and 2024. Over 70% of this increase has occurred since 2021.
Australia remains among the lowest-cost producers, second only to New Zealand, despite significant increases in labor costs. The nation has consistently maintained solid milk price margins since 2019, alongside New Zealand and the Netherlands. Emma Higgins, senior agricultural analyst at Rabobank, notes that the recent cost escalation is due to unique factors such as supply chain disruptions, increased shipping costs, extreme weather conditions, the Ukraine war, rising energy prices, and the increasing costs of feed and fertilizers. Monetary policy changes in response to COVID-19-induced inflation further exacerbated these challenges.
Higgins explains, "The majority of the cost pressure stems from farm operating expenses rather than additional costs such as debt servicing, taxes, and depreciation." By 2024, costs started to decline in the eight regions, allowing production expenses to revert to 2019 levels. "Feed expenditures have been the main driver of cost increases, with a 19% average increase in feed bills since 2019," states Higgins.
However, improved yields and favorable weather conditions in 2024 have led to a decrease in feed expenses, while fertilizer costs have also dropped due to supply stability. Lower interest rates in many regions have further reduced financial pressures. China's reliance on imported feed means feed costs represent over 60% of its total dairy production expenses, but recent decreases in food prices in 2023 and 2024 have helped reduce production costs.
The report, titled "The Cost of Milk: Analysis of Milk Production Costs," highlights a 14% increase in average total milk production costs in eight key export regions—Argentina, Australia, China, Ireland, New Zealand, Netherlands, California, and the Upper Midwest of the US—equivalent to an additional US$0.06 per liter between 2019 and 2024. Over 70% of this increase has occurred since 2021.
Australia remains among the lowest-cost producers, second only to New Zealand, despite significant increases in labor costs. The nation has consistently maintained solid milk price margins since 2019, alongside New Zealand and the Netherlands. Emma Higgins, senior agricultural analyst at Rabobank, notes that the recent cost escalation is due to unique factors such as supply chain disruptions, increased shipping costs, extreme weather conditions, the Ukraine war, rising energy prices, and the increasing costs of feed and fertilizers. Monetary policy changes in response to COVID-19-induced inflation further exacerbated these challenges.
Higgins explains, "The majority of the cost pressure stems from farm operating expenses rather than additional costs such as debt servicing, taxes, and depreciation." By 2024, costs started to decline in the eight regions, allowing production expenses to revert to 2019 levels. "Feed expenditures have been the main driver of cost increases, with a 19% average increase in feed bills since 2019," states Higgins.
However, improved yields and favorable weather conditions in 2024 have led to a decrease in feed expenses, while fertilizer costs have also dropped due to supply stability. Lower interest rates in many regions have further reduced financial pressures. China's reliance on imported feed means feed costs represent over 60% of its total dairy production expenses, but recent decreases in food prices in 2023 and 2024 have helped reduce production costs.
