Dairy

Dairy Industry Overview

Dairying is one of the Region’s, Victoria’s and Australia’s most significant agribusiness industries. This agribusiness industry encompasses:

• Dairy farmers; predominantly dairy cattle, but with increasing diversification into production of goat, sheep and buffalo milk. Dairy farming in Australia has an annual revenue of $3.9 billion.

• Milk and cream processing. Milk and cream processing in Australia has an annual revenue of $2.2 billion.

• Butter and dairy product manufacturing (excluding ice-cream and cheese).

• Ice cream manufacturing, with an annual revenue of $997.4 million in Australia.

• Cheese manufacturing. Milk and cream processing in Australia has an annual revenue of $2.6 billion.

• Milk powder manufacturing, with an annual revenue of $757 million in Australia.

ABARES estimates Australian milk production in 2016-17 to be 9 gigalitres (or 9 billion litres) from 1.6 million cows. This volume is a 5.7% decrease on the production in 2015-16. Influencing factors include:

• Globally depressed prices has impacted on large dairy corporates operating in Australia, bringing farm gate price reductions to local producers.

• The ongoing consolidation in the industry reflects a trend towards fewer, larger dairy farms

• There are continued improvements in productivity and an increasing average yield per cow

• There has been some development of new products

• There is saturation in the domestic market, but there are new growth opportunities in export markets.

At The Farm

• Production and milk processing levels, dairying is currently experiencing a period of volatility. Drought, floods, fluctuating demand, global industry impacts, and continuing industry deregulation are all part of the ongoing risks and variability experienced by Australia’s dairy farmers. Most recently, the industry has been heavily influenced by falling global prices.

• Dairy farmers are located at the ‘price taker’ end of an increasingly competitive agribusiness industry, with only a few opportunities to differentiate their product from other farmers:

• Production efficiencies due to scale, automation, genetic improvement and/or management practices.

• Organic and/or bio-dynamic production which has been attracting price premiums.

• Value-adding, through either activity or ownership in a business at the processing stage of the supply chain; For example, making cheese, yoghurt, whey protein derivatives, milk powder, ice cream, long-life products (UHT).