h Squeezing The Dairy Industry

Squeezing The Dairy Industry

Squeezing The Dairy Industry

Article #52

According to the new annual report by Agriculture Victoria, the dairy industry has been plagued by challenging times, with dry conditions causing considerably increases in water and feed costs and a sharp decline in milk prices.

The report states that dairy export value has fallen 7 per cent (from $2.037bn to $1.889bn) in the last year, while export volume of dairy has increased 4.9% from 567,000 tonnes to 595,000. Milk and cream exports increased 4.5% in volume to 367,000 tonnes, yet decreased 11% in value to $929million. Only the exports of cheese and whey products increased in value, by a minuscule 1% (or $9m increase), while the per tonne value decreased over $400 per tonne.

These trends have directly been attributed to the challenging agricultural conditions present in Victoria over the last year. Less than average rainfall totals and considerable rises in average temperature has strongly impacted pasture growth. Directly results from the above conditions caused rises in water prices and hence feed costs.

Due to the perceived farmer confidence that milk prices were going to deteriorate due to the poor conditions, farmers were more likely to accept less profit per product. Average farm earnings have been reported falling 70% compared with the previous year to $70,804 EBIT. Similarly returns on assets have been incredibly low (0.6%) compared to the previous year (5.3%).

In terms of exporting, our largest market currently is Japan (valued at $387m), followed closely by China, which has increased in the last financial year by 36%. Factors affecting export value include: the Russian embargo on western imports, global increased and support for each national dairy industry (such as in New Zealand, European Union & the US).

How can Australian Government reform the Dairy Industry?

Source: ILCS Consulting