Dairy exporters are groaning in Australia as Asian food companies jettison its milk for cheaper options over escalating record high milk prices. VERY SERIAL gathered that this development has caused hard times for dairy exporters as buyers opt for cheaper supply from New Zealand and further abroad.
(AUSTRALIA) – Record-high milk prices in Australia are causing challenges for the country’s dairy exporters as Asian food companies opt for cheaper supplies from New Zealand and other sources.
Farmgate prices reached a peak of $9.93 per kilogram of milk solids in the 2022/23 season and, although they have since fallen to $9.44, they remain 40% above the five-year average.
This has led to higher supermarket prices, with milk prices rising by 13% over the past year, the largest increase among all food groups, according to Dairy Australia.
“Domestic competition for milk has been driving higher prices for farmers compared to international rates,” said Eliza Redfern, an industry analyst at Dairy Australia. “Milk prices in Australia are considerably higher than those in New Zealand, the US, and Europe.”
Prices are expected to stay elevated due to reduced milk supply, and there is the added risk of further disruption from the arrival of El Nino this summer, which could bring drier conditions and affect feed availability.
Decline in Australian dairy production
Dairy production in Australia fell by an additional 5% last season due to flooding, labor shortages, and more farmers exiting the industry.
This follows two decades of declining supply, with production now at 8.1 billion liters compared to 10 billion liters in 2015.
While analysts are optimistic about the industry’s supply outlook due to sufficient feed and irrigation, retail prices are anticipated to remain high for several months.
Dairy processors, who purchase milk from farms before selling it to supermarkets, are expected to compete vigorously to secure supply.
Rabobank senior analyst Michael Harvey noted that while farmgate prices are unlikely to rise significantly, intense competition among dairy processors will prevent prices from falling significantly.
Australia’s milk prices are notably higher than in other countries, primarily due to a price-setting mechanism unique to the nation.
Under the dairy code of conduct, minimum opening milk prices are set once a year on June 1, preventing dairy processors from reducing prices offered to farmers during the season.