Home' NZ Dairy Farmer : February 2011 Contents 34 The Dairyman FEBRUARY 2011
ACROSS THE DITCH
DESPITE the unfriendly trading envi-
ronment created by our supercharged
dollar, the Australian dairy industry
is still steadily building export traction as it
notches up a remarkably solid year of sales.
And the $2.4 billion export trade's
hunger for dairy products isn't just restrict-
ed to butter, cheese and milk powder ---
cows are now settling in as a major busi-
ness into our star export markets in Asia.
Fast-growing demand in Asia has helped
cushion processors from a serious price
backlash for dairy products, despite this
year's 10 per cent jump in the exchange
rate which pushed the dollar to parity with
its US counterpart for the third time in as
many months recently.
While many forward sales deals by dairy
companies were conducted prior to dollar's
August surge, meaning the second half of
the financial year could potentially be a lot
tougher, there a few signs of weakening
demand from Asia.
Dairy Australia says China, which didn't
even rate among Australia's top 10 dairy
export destinations five years ago, is now
our third biggest market, behind Japan and
China's increasing thirst for high end
value-added infant formula products actual-
ly makes it our second most valuable dairy
export market, worth $229 million a year.
It also imported almost 50,500 dairy cat-
tle in 2009-10, worth $102 million.
Despite a dip in the total volume of dairy
exports sent overseas in the past year -
partly due to previous farm production cuts
- the value of the trade had climbed 6.3 per
cent by October.
India is also emerging as a major player
in international trade according to an indus-
try report by Rabobank which says the
dairy industry has entered a new market
era.After a run of extremely volatile years
for international dairy prices, Rabobank
senior analyst Tim Hunt said dairy com-
modities were trending to higher average
prices as China and India shaped up to
become major buyers in the next few years.
Together they account for more than one
third of the world's population and have
become the engine room for global dairy
growth in recent years, although until now
their own farm production has mostly their
rising consumer appetite.
"But the challenge of building safe sup-
ply chains, and the sheer volume of growth
required are making self sufficiency an
almost Herculean task," Mr Hunt said.
"In the wake of last year's melamine
baby formula contamination crisis we now
believe that China faces a structural market
deficit, and India is likely to call on the
world market more frequently in the next
three to four years.
"That demand will be difficult to fill
without a sustained period of high prices to
encourage more milk contributions from
higher cost regions."
Mr Hunt said dairy processors would
find it difficult to ignore opportunities in
China and India, ranging from product
sales, to selling know-how and services, or
investing in farms and factories to boost
One example of the diverse export open-
ings emerging for Australia has been the
market for heifers, needed to lift local pro-
duction in burgeoning dairy markets.
"Heifer exports have been a spasmodic
aspect of the Australian industry for the
past decade, but this business has built into
regular feature with year on year growth,
rather than opportunistic spikes, said Dairy
Australia's strategy manager Joanne Bills.
In fact, Ms Bills said one reason
Australian dairy commodity exports were
not growing faster to meet Asian demand
was that in recent years of volatile prices
and drought farmers had regularly supple-
mented their milk earnings with heifer
sales to exporters, subsequently limiting
our national herd's production capacity.
Asia demand points to solid year ahead
By ANDREW MARSHALL
AUSTRALIAN milk production is tipped to rise marginally to total 9.1 billion litres
this year, according to Dairy Australia --- up 100 million on 2009.
With annual milk product export values climbing to about $2.19 billion by October,
Dairy Australia's strategy manager, Joanne Bills, said global markets were rewarding
the cautious production lift with remarkably stability during the past eight months.
Overseas demand was yet to show any real impact from the dollar's rise to US98c
and above, with the last quarter of 2009-10 and the first months of this financial year
delivering a 30 per cent rise in the value of our dairy exports.
By October, the average per tonne value of Australia's dairy exports at $3600, was
up more than 16 per cent on the same period last year.
However, back on the farm recent farm production had been constrained, initially by
a jump in grain prices, then by a slow, cool and muddy start to summer.
"But a lot of irrigation dams are now full, there's plenty of grass and there is now
likely to be quite a lot of feed quality grain available to encourage extra milk produc-
tion from dairy herds," Ms Bills said. --- Andrew Marshall
Milk production tipped to rise further
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