Net milk exports shrinking

By Ross McInnes, QDO Vice President

Australia’s milk production came to a total of just over nine billion litres for the period 2016-2017 after a better-than-expected end to the year. This however, was a massive drop of nearly 7 per cent from the previous year and is a distant memory from 2001 when Australia reached 10.8 billion litres.

Queensland increased its milk production by 1pc to finish at 417 million litres and was the only state across the country to record an increase. Meanwhile, Northern Victoria dropped more than 16pc after an extremely wet spring on top of the Murray Goulburn price implosion.  In 2001, Northern Victoria topped 3 billion litres compared to 2016-2017 where they were down to 1.7 billion litres.

With water cutbacks in the Murray Darling Basin and structural issues facing the industry, it is extremely unlikely that Northern Victoria will ever repeat its history of high production figures. The massive reduction in milk in Victoria has had ramifications on Queensland milk processors seeking to top up supplies for their state. The biggest change since 2001 has been the balance between the proportion of liquid milk sales and export volumes. Exports counted for three times packaged milk sales in 2001 but now they are close to reaching parity.

The domestic market requires an extra 110 million litres each year which creates challenges for Southern processors to maintain a competitive export industry going forward. The result of lower production has seen huge increases of imports onto dairy shelves around Australia. Total imports in dairy manufactured goods on our shelves are now more than 20pc. New Zealand cheese is the biggest contributor with Australian consumers having problems finding little, if any, Australian cheese in the $6 category in the last few months.

In 2001, net exports counted for 5.5 billion litres but this year that number has dropped to 1.8 billion litres. It is clear, Australia badly needs a viable dairy export industry and these numbers should be a concern to everyone involved in the industry.  Unfortunately the result of processor and retailer labours to undercut on-shelf competitors with milk and cheese and remove domestic premiums have been less than helpful to farmers’ sustainability.