Australia: A Key Player in the Global Dairy Industry

Australia's sophisticated dairy sector plays an integral role in the global supply chain, positioning itself as a competitive force in international dairy markets. The industry is characterized by its robust production capabilities and significant export activities, contributing to the nation's economy.

Dairy Cattle and Milk Production

Australia is home to approximately 1.43 million dairy cattle, which contribute to an impressive annual milk production volume of around 8.8 billion liters. This output supports a strong domestic market and a thriving export sector.

Milk Processing and Cheese Production

The country's processing facilities can handle about 9.1 billion liters of milk annually. Cheese production is a substantial segment, with an annual output of around 365,000 tons, projected to increase to 435,000 tons by 2024.

Milk Powder and Whey Production

Australia meets high international demand by producing approximately 300,000 tons of milk powder and whey each year. These products primarily target markets in the U.S., EU, China, and Southeast Asia.

Key Market Players

Prominent companies in the Australian dairy industry include Saputo Inc., Coles Group Limited, Beston Global Food Co., and Yili, which are at the forefront of industry advancements and market dynamics.

Export and Import Statistics

Australia is predominantly an export-oriented dairy producer, focusing on milk powder, cheese, and whey exports, mainly to the U.S., EU, China, and Southeast Asia. Import activities primarily concentrate on butter to meet local demand.

Recent Industry Events

• Saputo Inc. sold two processing plants to Coles Group Limited.
• Beston Global Food Co. explored divestments to mitigate financial stress.
• Coles reduced cheese prices to improve consumer access.
• Saputo ceased operations at King Island Dairy, affecting 58 employees.
• Beston Global Food entered administration, impacting 159 employees and 22 farmers.
• Pure Dairy launched a new facility in Dandenong South and allied with Great Lakes Cheese.

Current Market Trends and Challenges

There is a shift towards premium dairy products, despite a projected 5% drop in cheese production for 2023/2024. Conversely, skim milk powder and butter production are increasing. Labor issues, such as those at Saputo's Burnie plant, remain a challenge.

International Relations and Industry Shifts

Australia navigates complex international relations, particularly in Indonesia, and legal entanglements, such as Fonterra's case against Bega. Despite challenges like processing plant closures, consumer demand remains robust, supported by competitive pricing.

Rabobank's Outlook and Government Support

Rabobank's "A Period of Prosperity" report highlights Australian exporters' contributions to milk supply growth. The government has designated $18 million to aid South Australian farmers in drought resilience.

Conclusion

Despite challenges such as cost-induced closures, opportunities arise through innovation and strategic alliances. Industry events like the Australian Dairy Conference 2025 provide platforms for discussion and advancement. Favorable commodity returns and currency conditions are expected to improve margins through 2025. However, Australian dairy farmers are dissatisfied with recent farmgate milk price increments, arguing they do not adequately reflect current market conditions.

Regional Focus: Victoria

Victoria, accounting for 63% of Australia's milk supply, faces a severe housing crisis impacting workforce attraction and retention. Climate change drives farmers to genetic advancements for heat-tolerant cattle. Victoria is also moving to legalize virtual fencing for cattle, aligning with other states, supported by new regulations from the Victorian government.

Weather and Other Challenges

Australia’s dairy sector faces significant challenges due to natural disasters, with more than 80% of the country’s milk producers grappling with the aftermath of extreme weather events. Despite these challenges, the sector shows signs of recovery, with both volume and value in dairy consumption rising. However, the start of the 2025-26 dairy season has left suppliers disillusioned as opening milk prices fall below the cost of production.

The Australian competition regulator announced it would not oppose a potential transaction between Lactalis and Fonterra. This decision marks a major boost for Lactalis as it seeks to expand its footprint in the dairy sector.

Australia's dairy farmers are sounding the alarm following the Australian Competition and Consumer Commission (ACCC)'s decision to approve the Lactalis-Fonterra transaction. The Australian Dairy Farmers (ADF) have expressed serious concerns that the move will leave producers vulnerable, particularly in crucial dairy regions such as Victoria and Tasmania. This decision could erode processor competition, which is fundamental to maintaining fair farmgate milk prices amid a constricted Australian milk pool.

India's firm stance on dairy tariffs delays its trade pact with Australia. Despite an interim trade agreement reached in 2022, efforts to secure a broader, more comprehensive pact have noticeably stalled due to India's protectionist stance on dairy tariffs.

Modified: 2025/05/18