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Australian Dairy Industry Struggling to Meet Asian Dairy Demand
June 3, 2016

Australia’s hopes of nearly doubling milk production to meet the future boom in Asian food ­demand have been dashed by the dairy industry crisis.

Figures to be released today by peak industry body Dairy Australia show milk production is continuing its downward slide as farmers battle to remain profitable.

The total amount of milk produced on Australia’s 6100 dairy farms this year is expected to be to 9.55 billion litres, 2 per cent less than in 2014-15, and way down from the 2000 peak of nearly 11 billion litres.

The crash last month of dairy prices in Victoria and Tasmania by major processors Murray Goulburn and Fonterra below the cost of production has forced many farmers to sell dairy cows or quit the industry.

Dairy Australia chief executive Ian Halliday yesterday said the question of how long Australia would remain a reliable supplier of dairy products for export was now a concern being openly voiced by some overseas buyers.

But Mr Halliday said farmers could not be expected to increase milk production or expand their herds until confidence and profitability returned to the industry.

After Australia’s biggest milk company Murray Goulburn slashed its milk price retrospectively for the full financial year by 15 per cent late in April — attributed to low world prices, corporate mismanagement, a global glut and overly optimistic sales figures — there were predictions 20 per cent of dairy farmers in Victoria and Tasmania would go broke.

“Overseas customers are asking what is the future for Australia; they ask are we reliable long-term suppliers if our production continues to fall like it is,” Mr Halliday said.

“There is no doubt there are opportunities in export markets in the medium term, and that we can remain competitive on world markets; but we will only get production growth with profitable farmers and a milk price above the cost of production, higher than $6 a kilogram of milk solids (45c a litre of milk).”

Mr Halliday was deeply critical of Murray Goulburn’s former chief executive Gary Helou — who resigned as the farmgate milk price was dramatically dropped to $4.75/kg — for continuing to talk up the milk price during 2015-16 and encouraging farmers to expand their production, despite falling global dairy prices.

“Processors have excess ­capacity (in their factories) and are looking for more (milk) volume, but farmers are facing a perfect storm right now and that volatility is going to continue for at least another year,” Mr Hal­liday said.

“People like Gary (Helou) were saying last year that we needed to get to 15 billion litres (national milk production) and that Tasmania should be aiming (from 800 million litres of milk) to three billion litres, but the right market signals were never there; Dairy Australia never quoted volume targets like that.”

The latest Dairy Australia figures reveal confidence has plummeted in the past month.

In March, 67 per cent of more than 1000 surveyed farmers across the nation felt optimistic, but just 45 per cent remain confident.

The industry is now waiting for opening farmgate milk prices to be set for the 2016-17 year, starting next month, which will determine the future of many farmers.

By: Sue Neales
Source: The Australian


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