Australia's Dairy Industry - The Big Picture

It is surprising for many of us when we discover the relative size of Australia's Dairy Industry compared to the rest of the world.
The Australian Dairy Corporation produces an annual compendium, which has some interesting reading. 
World Dairy Cow Numbers (1997)

 India - 		34,000,000
 Brazil - 		23,600,000
 European Union - 	21,700,000
 Russia - 		14,600,000
 USA - 			9,300,000
 New Zealand - 		3,200,000
 Australia - 		2,000,000


World Milk Production

 European Union - 	24%
 USA - 			15%
 Russia - 		7%
 India - 		7%
 South America - 	5%
 New Zealand - 		2%
 Australia - 		2%
These figures suggest we are an insignificant part of the world dairy Industry. However, if we consider our contribution to the world dairy export trade, the picture is very different. World trade represents 8% of the total world production. 
Exporters Share of Market Trade

 European Community -	38%
 New Zealand - 		31%
 Australia - 		12%
 USA - 			5%


Although Australia and New Zealand produce only 4% of the world's milk, we are predominantly exporters of our products which combined represents 43% of the world trade in dairy commodities. Our exposure to this market has major repercussions on our farm gate price.
A few examples of the farm gate price of milk are as follows: 

 Country - 	cents per litre
 Australia - 		28
 Canada - 		55
 European Union - 	44
 Japan - 		96
 New Zealand -		26
 Poland - 		24
 Switzerland -		75
 USA -			40
This picture shows that we are currently near the lowest farm gate price in the world. It could be argued that to survive at this level we have adopted some very efficient and effective farm management practices. Our cows feed on a predominantly pasture diet in a relatively extensive system with no shedding.
This is certainly the case in Victoria where farm gate price is well below 28 cents per litre and closer to 24 cents per litre.

Victoria has 8,000 of the 13,000 dairy farms in Australia. There are 1.2 million dairy cows producing 62% of Australia's milk, Western Victoria produces 30% of Victoria's milk. Half of Australia's milk production is exported in manufactured form, most of this coming from Victoria and Tasmania. 

These exports are purchased as follows: 
Asia			52%
Japan			17% 		
Middle East		7%
Given that the increase in milk production in Australia is far outweighing any increase in domestic consumption, our farm gate price in Victoria will be increasingly exposed to the value of the World Export Market Price of Milk Powders, Cheese and Butter and the value of the Australian Dollar.

The world price is determined by supply and demand. Recent downturns in Asia have reduced demand from that region which is one of our major importers. Probably the most significant impact however, on the world price is the supply from the European Union and the USA. Both these giants in world production are capable of dropping the price through the sale of subsidised product in the world market. These effects may be farmore reaching than any impact that deregulation of the Australian Dairy Industry will have on farm gate prices in Victoria.

 



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