News

Market growth for milk sector

By Dairy News

Australia’s dairy sector can expect continued growth in demand while overall production will remain flat to 2030 compared to 2018 levels, according to research released by ANZ today.

The Milk Run report found that despite recent challenges faced by the industry, the market opportunities which have driven dairy growth and innovation over the past two decades remain as strong as ever.

Commenting on the report, Head of Agribusiness at ANZ Mark Bennett said as with most major agricultural industries, the Australian dairy industry had been through a period of significant structural change in recent years.

“However, for those producers who are profitable today, the outlook is strong for prices as processors look to secure supply,” Mr Bennet said.

The outlook for exports also remains strong with demand from East Asia continuing its positive growth, particularly for fluid milk and cheese exports.”

“For consumers, the pricing outlook for retail milk and dairy product is unclear, and will be driven by a number of variables.

Factors that will impact shelf prices include changes in sourcing, offtake-pricing and milk production, as will strategic and marketing decisions made by retailers about milk prices in relation to wider supermarket pricing strategies.

At the same time, the growing range of new dairy products available to consumers continues to present fresh opportunities for newer and smaller processors.

The Milk Run — key findings:

The continuation of current trends would see milk production remain flat for the next decade compared with 2018, as higher cash costs would see milk production rebounding on the dip in production felt in 2019 but rising to just over 9400 Ml/year compared with the 2018 production year.

A constrained domestic production and ever-increasing demand for milk and dairy products in East Asia is likely to spell future strong prices for those dairy producers remaining in the industry.

The impact of the recent bushfires, while locally devastating, is unlikely to have a significant impact on national milk supply.

Australian milk production looks set to continue to be flat for the short term with current trends resulting in production in Queensland continuing to decline, while the primary source of growth being seen in the southern states, particularly Tasmania, where production would rise by 20 per cent by 2030.

Lower production in the major production countries should bode well for prices in the future, however many in the industry are concerned that consumers have limited tolerance for higher prices.

The future of retail milk prices remains uncertain following the end of $1 milk in the major supermarkets. Depending on whether retailers continue to keep a lid on prices, the price of a litre of milk could increase at an average of between 1.4 and 2.8 per cent a year until 2030.

Processors are likely to face the most significant challenges going forward as they look to make best use of manufacturing capacity and growing export markets with lower milk supply and a shifting supply base.