Australians Advised to Brace for 'Sticker Shock' Amidst Declining Dairy Exports and Rising Imports
Source: The DairyNews
Australia is grappling with a decrease in dairy exports and a surge in imports, a consequence of diminished domestic milk production and a waning competitive edge in the export market.
According to RaboResearch's senior dairy analyst, Michael Harvey, outlined in the Australian Dairy Sector Outlook: Slowing Trading Places report, Australia witnessed a steady decline in milk production, reaching 8.129 billion litres in 2022/23, marking the third consecutive year of reduction.
Harvey highlighted that during the same period, Australia's milk supply for manufacturing plummeted to its lowest point since the 1990s. In 2020/21 alone, the country experienced a loss of over 700 million litres of milk from the supply chain, resulting in a severe shortage for manufacturing purposes.
Contrastingly, the volume of Australia's milk imports in liquid milk equivalent doubled between 2013 and 2023, primarily driven by increased imports of butter and skim milk powder.
Despite the decrease in production, Australia remains the world's fifth-largest dairy exporter, contributing to four percent of global trade. Harvey emphasized the cyclicality of the export sector due to its commodity nature, which will impact farmgate pricing both positively and negatively.
Harvey warned that unless there is a transformative shift in domestic milk production trends, Australia will continue to experience reduced milk supply, coupled with a modestly expanding domestic market, resulting in fewer milk solids available for export.
While Harvey assured that Australia maintains a secure supply of locally sourced dairy products, he predicted a growth in dairy imports due to heightened demand for more affordable options in the medium term. In response, he urged dairy companies to prioritize value over volume, advocating for investments in innovation, technology, and partnerships with milk suppliers.
Harvey acknowledged the ongoing support from retailers to prioritize local sourcing, ensuring that Australian-origin dairy products remain accessible to consumers. However, he cautioned that the pricing of local products might occasionally trigger 'sticker shock' for consumers.
Harvey highlighted that during the same period, Australia's milk supply for manufacturing plummeted to its lowest point since the 1990s. In 2020/21 alone, the country experienced a loss of over 700 million litres of milk from the supply chain, resulting in a severe shortage for manufacturing purposes.
Contrastingly, the volume of Australia's milk imports in liquid milk equivalent doubled between 2013 and 2023, primarily driven by increased imports of butter and skim milk powder.
Despite the decrease in production, Australia remains the world's fifth-largest dairy exporter, contributing to four percent of global trade. Harvey emphasized the cyclicality of the export sector due to its commodity nature, which will impact farmgate pricing both positively and negatively.
Harvey warned that unless there is a transformative shift in domestic milk production trends, Australia will continue to experience reduced milk supply, coupled with a modestly expanding domestic market, resulting in fewer milk solids available for export.
While Harvey assured that Australia maintains a secure supply of locally sourced dairy products, he predicted a growth in dairy imports due to heightened demand for more affordable options in the medium term. In response, he urged dairy companies to prioritize value over volume, advocating for investments in innovation, technology, and partnerships with milk suppliers.
Harvey acknowledged the ongoing support from retailers to prioritize local sourcing, ensuring that Australian-origin dairy products remain accessible to consumers. However, he cautioned that the pricing of local products might occasionally trigger 'sticker shock' for consumers.
