Australian Dairy Sales Gain Momentum as Prices Drop, China Shows Signs of Recovery
Source: DairyNews.today
Australian dairy sales are climbing both domestically and in export markets, with lower farmgate prices and deflationary trends driving consumer demand. Meanwhile, a slowing domestic dairy industry in China is boosting opportunities for Australian exporters, according to recent reports from Dairy Australia and Rabobank.
Domestic Dairy Gains Driven by Lower Prices
New data from Dairy Australia shows significant growth across key dairy categories in the domestic market. Cheese, butter, and yoghurt volumes rose by 2.1%, 3.2%, and 7.0%, respectively, in 2024, despite persistent cost pressures in other grocery categories.
The rise in consumption coincides with a rare period of deflation in dairy prices, with major retailers like Aldi, Coles, and Woolworths reducing the cost of generic milk from $1.60 to $1.55 per litre. This marks the first time in three years that cheese prices have seen deflation.
“There are multiple factors behind the recent dairy deflation,” said Eliza Redfern, an industry analyst at Dairy Australia. “Retailers are targeting shelf prices for private-label dairy products, and the Australian Competition and Consumer Commission’s scrutiny of grocery inflation is playing a role in moderating value growth across dairy categories.”
Dairy has emerged as a standout in the Australian Bureau of Statistics’ latest consumer price monitoring report, with prices tracking below last year’s levels, making it the only grocery category to record such a trend.
Export Opportunities Rise Amid China’s Domestic Supply Woes
China’s domestic dairy industry faced significant setbacks during the 2023-24 fiscal year, with top firms such as China Mengniu Dairy and Inner Mongolia Yili Industrial Group reporting revenue declines of 12.6% and 9.5%, respectively. However, Australian exporters are beginning to benefit from these challenges.
“China’s weakening dairy supply rather than a dramatic increase in domestic demand is driving the renewed interest in imports,” said Rabobank dairy analyst Michael Harvey. He attributed the supply-side issues to farm exits and drought conditions affecting parts of China.
The Global Dairy Trade (GDT) index has posted consecutive gains in recent months, signaling improving demand for international dairy products, despite China’s broader economic slowdown.
China Remains Key Market for Australian Dairy
China remains Australia’s largest export market for dairy products, a trend that shows signs of continuing. “In the past few months, we’ve seen positive indicators of Chinese interest in imported dairy, and this is critical for Australian producers,” said Redfern.
Rabobank data suggests that Australian dairy exports performed well in 2023-24, despite earlier concerns about weakening demand in China.
Challenges and Outlook
While domestic and export markets are showing promise, challenges remain. Australian dairy farmers are facing squeezed margins due to low farmgate prices, and the sustainability of price deflation in retail markets is uncertain.
Still, the combination of favorable export conditions and increased domestic consumption could offer a lifeline to an industry navigating economic pressures.
“Despite economic uncertainty and headwinds in key markets, the fundamentals of the Australian dairy sector remain strong, with opportunities for growth both at home and abroad,” Harvey said.
New data from Dairy Australia shows significant growth across key dairy categories in the domestic market. Cheese, butter, and yoghurt volumes rose by 2.1%, 3.2%, and 7.0%, respectively, in 2024, despite persistent cost pressures in other grocery categories.
The rise in consumption coincides with a rare period of deflation in dairy prices, with major retailers like Aldi, Coles, and Woolworths reducing the cost of generic milk from $1.60 to $1.55 per litre. This marks the first time in three years that cheese prices have seen deflation.
“There are multiple factors behind the recent dairy deflation,” said Eliza Redfern, an industry analyst at Dairy Australia. “Retailers are targeting shelf prices for private-label dairy products, and the Australian Competition and Consumer Commission’s scrutiny of grocery inflation is playing a role in moderating value growth across dairy categories.”
Dairy has emerged as a standout in the Australian Bureau of Statistics’ latest consumer price monitoring report, with prices tracking below last year’s levels, making it the only grocery category to record such a trend.
Export Opportunities Rise Amid China’s Domestic Supply Woes
China’s domestic dairy industry faced significant setbacks during the 2023-24 fiscal year, with top firms such as China Mengniu Dairy and Inner Mongolia Yili Industrial Group reporting revenue declines of 12.6% and 9.5%, respectively. However, Australian exporters are beginning to benefit from these challenges.
“China’s weakening dairy supply rather than a dramatic increase in domestic demand is driving the renewed interest in imports,” said Rabobank dairy analyst Michael Harvey. He attributed the supply-side issues to farm exits and drought conditions affecting parts of China.
The Global Dairy Trade (GDT) index has posted consecutive gains in recent months, signaling improving demand for international dairy products, despite China’s broader economic slowdown.
China Remains Key Market for Australian Dairy
China remains Australia’s largest export market for dairy products, a trend that shows signs of continuing. “In the past few months, we’ve seen positive indicators of Chinese interest in imported dairy, and this is critical for Australian producers,” said Redfern.
Rabobank data suggests that Australian dairy exports performed well in 2023-24, despite earlier concerns about weakening demand in China.
Challenges and Outlook
While domestic and export markets are showing promise, challenges remain. Australian dairy farmers are facing squeezed margins due to low farmgate prices, and the sustainability of price deflation in retail markets is uncertain.
Still, the combination of favorable export conditions and increased domestic consumption could offer a lifeline to an industry navigating economic pressures.
“Despite economic uncertainty and headwinds in key markets, the fundamentals of the Australian dairy sector remain strong, with opportunities for growth both at home and abroad,” Harvey said.
