Australian Dairy Industry In Focus 2008 - Understanding Dairy Markets

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Australian Dairy Industry In Focus 2008 - Understanding Dairy Markets

Australian Dairy Industry

In Focus 2008


Australian dairy at a glance (2007/08)

Table 1

National dairy herd

Average herd size

Milk production

Average annual milk

production per cow

Dairy – Australia’s third

largest rural industry

Dairy – major value-added

food industry

1.7 million cows

215 cows

9,223 million litres

5,231 litres

$4.6 billion value at farmgate

$11.5 billion value at

wholesale

Milk utilisation Cheese 36%

Drinking milk 24%

SMP/butter 20%

WMP 12%

Casein/butter 4%

Other 4%

Production of main

commodities (tonnes)

Milk powders 306,000

Cheese 359,000

Butter (CBE) 127,600

Dairy – major export industry

Percentage of Aust milk

production – exported

Major markets for Australian

dairy products – (tonnes)

$2.9 billion

11% of world dairy trade

45%

Australia 2,533,700

(including 2,140,800 of

drinking milk)

Japan 132,000

Singapore 76,300

Malaysia 51,000

Indonesia 48,700

China 46,500

Per capita consumption Drinking milk 104Lts

Cheese

12kg

Dairy industry workforce Direct employment of

approximately 40,000

ABARE estimates a regional economic muliplier of

2.5 from the dairy industry

Abbreviations

ABARE Australian Bureau of Agricultural and

Resource Economics

ABS Australian Bureau of Statistics

ADC Australian Dairy Corporation

AMF Anhydrous milk fat

AUST Australia

BMP Buttermilk powder

CAGR Compound annual growth rate

CBE Commercial butter equivalent, a unit of conversion

of AMF to butter (1kg butter = 0.805kg AMF)

cpl Cents per litre

(e) Estimated data

DA Dairy Australia

EU European Union

EU (15) European Union – original 15 member states

EU (10) Additional 10 accession countries – since May 2004

FNQ Far north Queensland

Gps Gippsland

n.a. Data not available

NCE Natural cheddar equivalent – unit of conversion

of processed cheddar, pastes and spreads to natural

cheddar (1kg processed product weight = 0.806kg

natural cheddar)

NDFS National Dairy Farmers’ Survey 2008

2008

NV Northern Victoria/NSW Riverina

(p) Provisional data

(r) Revised data

SEQ South-east Queensland/north-east New South Wales

SMP Skim milk powder

SNF Solids non fat

UHT Milk subjected to ultra high temperature treatment

to extend shelf life

WMP Wholemilk powder

WPC Whey protein concentrate

WV Western Victoria

Published by Dairy Australia.

Australian Dairy Industry In Focus 2008 is published for the information of readers only. The information in this report is

published with due care and attention to its accuracy, but Dairy Australia accepts no liability if, for any reason, the information

is inaccurate, incomplete or out of date. You may copy and distribute parts of this report, provided that it is not for commercial

use and you acknowledge Dairy Australia as the information provider.

© Copyright Dairy Australia 2008. All rights reserved.

ISSN 1448-9392

DG/Geon/2008


Contents

Foreword ................................................................................. 2

Dairy 2008: Situation & Outlook ........................................................... 3

The Australian dairy industry .............................................................. 9

Farm facts ............................................................................... 11

Milk production .......................................................................... 17

Dairy manufacturing ...................................................................... 21

Dairy markets ............................................................................ 22

Australian consumption of dairy products ................................................. 24

Drinking milk ............................................................................. 25

Cheese .................................................................................. 27

Butter .................................................................................... 28

Fresh and frozen dairy products .......................................................... 29

Milk powders ............................................................................ 30

Whey products and casein ................................................................ 32

Industry organisations and structure ...................................................... 33

Industry levies ........................................................................... 36

Appendices

1. Regions ............................................................................... 38

2. Milk production ....................................................................... 39

3. Manufacturing processes ............................................................. 40

4. Supermarket sales .................................................................... 43

5. Exports ............................................................................... 46

6. Imports ............................................................................... 51

Index .................................................................................... 52

Dairy Australia has collected the statistics in this publication from Australian dairy companies and other Australian dairy

organisations (except where other sources are indicated).

Australian Dairy Industry In Focus 2008 1


Foreword

Australia’s dairy industry is one

of the three most important rural

industries, with a farmgate value

of $4.6 billion in 2007/08. Dairy

ranks fifth in agricultural exports

– valued at $2.9 billion.

Milk production slipped 4%

during 2007/08 to 9.2 billion

litres, under the influence

of drought conditions in inland

Mike Ginnivan

regions that significantly reduced

Managing Director

Dairy Australia irrigation allocations and cow

numbers. Export volumes

followed a similar pattern, reflecting the

lower availability of product for sale; but

high world dairy commodity prices meant

that export returns increased. In the local

market, supermarket sales of dairy products

continued to increase in both volume and

value – with the retail value of the major

dairy categories increasing by nearly 10%

to more than $4.6 billion in 2007/08, driven

by strong price growth across all categories.

Conditions were mixed for Australian

dairy farmers across the various dairying

regions of Australia in 2007/08. While the

irrigated regions faced dry conditions and

much uncertainty associated with reduced

irrigation water availability, the coastal

regions experienced generally favourable

seasonal conditions. Farmgate milk prices

increased sharply in response to strong

world prices, but the full impact on farm

margins was reduced by rising input costs.

The feature article covers an October Update

to the annual Dairy 2008: Situation &

Outlook report. This year’s report found

that, while the industry is enjoying strong

world market conditions, it has entered

a brave new era with increasing complex

and volatile influences affecting the

supply chain. Nevertheless, a very high

78% of farmers surveyed in February

2008 were positive about the future of the

industry; and this figure increased further

in September – driven by continuing strong

milk prices and prospects for an easing

in feed grain costs. However, local industry

growth remains

constrained by rising input costs;

uncertain climatic conditions; limited

national herd growth; and the impact

of government policy.

Dairy Australia is the industry’s farmerowned

service organisation. Funded

by farmer levies, with matching research

and development funds from the Australian

Government, Dairy Australia’s role is to

boost the long-term sustainability and

viability of local farm businesses and

the regional communities that depend

on the dairy industry. The organisation

works across the dairy supply chain

in areas that benefit the entire industry

– from farming through manufacturing,

to domestic and export markets. More

detail on the objectives and the way Dairy

Australia interacts with the other industry

organisations is available in the Industry

Organisations and Structure section

on page 33.

I would like to extend Dairy Australia’s

thanks to the dairy farmer co-operatives

and companies that contribute to our

regular data collections. Without their

participation, Australian Dairy Industry

In Focus could not maintain its reputation

as the most comprehensive and credible

collection of Australian dairy industry

statistics available. Regular monthly updates

of much of the industry production data

included in this publication are available

from www.dairyaustralia.com.au each

month. The website also features Dairy

2008: Situation & Outlook, together with

the October 2008 Update. This year is the

fifth edition of this annual industry report

produced by Dairy Australia to provide

a comprehensive overview of the Australian

and global dairy scene.

I trust you will find that this latest issue

of Australian Dairy Industry In Focus

remains a valuable source of knowledge and

information on this important industry.

2

Australian Dairy Industry In Focus 2008


Dairy 2008: Situation & Outlook

Background

The Situation & Outlook report

is prepared each year to provide a clear

and timely picture of what is happening

in the Australian dairy industry, its key

drivers and expectations for the future.

It draws on the annual National Dairy

Farmer Survey results, plus the views

and opinions of global dairy market

analysts, retail analysts, dairy company

management, farm consultants and

farm leaders.

As well as informing farmers, the report

aims to provide factual insights into

dairy for banks, governments, regional

communities and suppliers of products

and services to the dairy industry.

The full Situation & Outlook report was

published in June, with an update released

in October. This feature article summarises

key findings from both the June and

October reports.

The industry in October 2008

The Australian dairy industry is enjoying

the best world market conditions

in decades, yet remains constrained

by the high cost and limited availability

Figure 1

Surveyed spot prices of Australian exporters

$6,000

$5,000

$4,000

Butter

SMP

WMP

Cheddar

of production inputs, the on-going

uncertainty of climatic conditions and

reduced dairy herd numbers.

International dairy commodity prices

rose to record levels through 2007, due

to consistent strong demand and tight

supplies, as well as the effects of exchange

rates and cuts in export subsidies. Prices

have contracted a little during the first

half of 2008, due to some buyer resistance

and improved product availability, but

remain at historically high levels. The

benefits of record prices for Australian

exporters were, to some extent, offset by

the increasing value of the local currency

during the first half of the year.

More recently, softening commodity prices

have been offset by a weakening currency;

which has moved from a position of nearparity

with the $US in mid-July, back to

around the 70¢ level in just three months.

Farmgate prices in southern regions

increased by more than 50% in 2007/08.

The consolidating international market

outlook may see farmgate prices for the

full 2008/09 year recede by between

0 and 5% based on opening prices –

however competition between companies

for milk supply is likely to limit falls.

$US/Tonne

$3,000

$2,000

$1,000

$0

Sep 01

Mar 02

Sep 02

Mar 03

Sep 03

Mar 04

Sep 04

Mar 05

Sep 05

Mar 06

Sep 06

Mar 07

Sep 07

Mar 08

Sep 08

Source: NDFS 2008

Australian Dairy Industry In Focus 2008 3


Figure 2

Average farmgate milk price to Australian dairy farmers ($/kg milk solids)

$8.00

$7.00

$6.00

$5.00

$4.00

$3.00

$2.00

$1.00

$0.00

2001/02

2002/03

2003/04

2004/05

2005/06

2006/07

2007/08

Source: NDFS 2008

The world market is expected to be more

volatile than in the past due to the tight

supply conditions, as cautious export

customers are hesitant to lock in significant

forward commitments.

In fresh milk regions, farmgate milk prices

reflect both the sharply higher southern

milk values, as well as local processors’

greater need for certainty of supply.

This has led to purchase commitments

of up to five years between processors

and farmers, at prices up to 10% higher

than in 2007/08.

More than 75% of dairy farmers felt

some impact of drought during the year.

While average dairy farm cash incomes

were significantly higher, farmers have

experienced large increases in the costs

of feed inputs, including grain, fertiliser

and energy costs. There are significant

differences in the impacts of these costs

on cash margins between regions and

production systems.

Climate and feed costs have been

identified in this year’s survey as the

major current and future challenges for

most dairy farmers. The uncertainty

surrounding future climate variability,

what it means for current farming systems,

access to water, input costs and future

profitability, is undermining the capacity

for growth in the Australian dairy sector,

despite a strongly positive attitude from

most farmers toward the industry’s future.

Sustained farmgate prices in the next few

years, combined with a return to normal

seasonal conditions, should see confidence

sustained and greater investment

in expansion. However, based on farmer

expectations in the 2008 survey, confidence

has not yet translated into stronger milk

production intentions.

Into the medium term, the market outlook

for dairy remains positive. However,

Australia’s participation in world markets

will depend on the confidence that farmers

have to invest and grow into the future.

What did farmers say?

The September 2008 update of the National

Dairy Farmer Survey results includes

the following key findings affecting the

outlook for the production sector.

4

Australian Dairy Industry In Focus 2008


Confidence in sourcing feed inputs

• 83% of farmers were confident that

they will be able to source grain and

fodder of an acceptable quality and

price over the next 12 months.

• Of those farmers anticipating

difficulties, price is expected to be

the main issue for grain; while both

availability and price are concerns

for fodder, particularly in northern

Victoria/southern NSW.

• While mainland states were

generally confident about sourcing

grain, 20% of Tasmania farmers

expressed concerns.

Attitude and challenges

• Confidence among the farmers who

participated in both the February

and September surveys continued

to rise over the year – up five points

to 89%.

• 35% of the September respondents

said they were very positive about the

future – up from 26% in February.

• Tasmanian farmers continue to be

the most positive about the industry’s

future (97%); however both western

Victoria and Gippsland registered

figures above 90%.

Figure 3

Percentage of farms confident in ability to source grain and fodder supplies

100

Source: NDFS 2008

80

Percentage

60

40

20

0

Aust NV WV Gps SEQ NSW SA WA Tas

Figure 4

Percentage of farms feeling positive about the industry’s future

100

Feb 2008 Sep 2008

Source: NDFS 2008

80

Percentage

60

40

20

0

Aust

NV WV Gps SEQ NSW SA WA Tas

Australian Dairy Industry In Focus 2008 5


• The largest shift came from Western

Australia, where the confidence among

participating farmers increased from

67% in February to 88% in September –

driven by improved milk prices.

• Concerns about climate and the

availability and cost of production

inputs have clearly overtaken milk

price as the greatest current and future

challenges for dairy farmers, although

the emphasis does vary by region.

• Climate remains the major future

challenge for 17% of farmers; together

with the future cost and availability

of irrigation water.

World dairy demand eases;

longer-term outlook still buoyant

The world market for dairy commodities

has been unsettled in recent months, with

prices falling sharply. The catalyst for

a softer market is a strong milk production

supply response and slightly weaker

demand in some markets. Nevertheless,

the market structure for dairy products

has fundamentally changed in recent

years. Stock levels have been reduced

significantly and export subsidies have

been set to zero. While these market

fundamentals remain in place, market

prices will trade above traditional ceilings.

With the recent price falls, the market now

looks set for a period of volatility.

In the medium term, rising incomes

due to economic growth, increasing

populations and pressures on the limited

availability of agricultural land and

products are sustaining higher world food

prices. Dairy should remain a beneficiary

of these trends.

The improving perceptions of the

nutrition, convenience and taste benefits

of dairy have seen it become a more staple

part of diets, which is sustaining consumer

demand in developing markets.

Figure 5

Percentage of farms’ nominated greatest FUTURE challenge

2004

Climate

2005

2007

2008 Labour

Source: NDFS 2008

Water

Cost of other inputs

Cost of feed

Profits

Price of milk

0% 10% 20% 30% 40% 50% 60%

6

Australian Dairy Industry In Focus 2008


While dairy prices remain high, ingredient

buyers will consider substituting lower

priced vegetable-based substitutes.

However, these competing and alternative

food groups have also experienced

strongly increasing prices, and so dairy

commodities have maintained their price

relativities. Dairy’s functionality also

limits the potential for end users to further

dilute dairy content in ingredient

formulations, with buyers preferring

to absorb or pass on higher costs.

Australian market

situation & outlook

The Australian market for dairy products

is mature, but has nevertheless delivered

dependable volume and value growth

in recent years.

Domestic market sales of the major

consumer dairy products are estimated

to have increased by 13% in value during

2007/08, largely as a result of strong price

increases across all product categories,

averaging around 10% on the previous year.

Value growth in the supermarket sales

channel has ranged between 8% and 16%

during the six months to August 2008; but

consumers have responded to the higher

prices in some categories by purchasing

less. Sales volumes declined over the six

months to August 2008 in cheese and UHT

milk, but growth continued in fresh milk,

butter and dairy blends.

Average retail price increases have been

strong over the year – well above the

general inflation rate across all major dairy

product categories – as world commodity

prices are increasingly reflected in retail

prices to consumers. However, even these

price increases (at around 10-15%) have

been nowhere near the rate of increase

in farmgate prices over the year (at around

50%). While the month-to-month price

increases have eased over the past three

months, the percentage change on last year

is still in double figures.

Rising food prices gained a high profile

during 2008, aided by the ACCC enquiry

examining the dynamics of the food

retail market and, in particular, the major

supermarket chains. This environment

Figure 6

Supermarket growth by dairy category – six months to August 2008

Volume

Milk – fresh

Value

Source: NDFS 2008

Milk – UHT

Cheese – Cheddar

Cheese – non-cheddar

Butter

Dairy blends

–4% –2% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

Australian Dairy Industry In Focus 2008 7


increased the resistance of retailers

to accept and pass on higher prices from

dairy manufacturers, particularly in the

case of private label products, so that the

gap between branded and private label

products expanded during the year.

Milk volumes have continued to grow,

with recent sales data indicating that

consumers are “trading-down” from

branded to private label products, and

from modified to regular full cream milks,

to limit the impact of price increases.

For Australian dairy manufacturers

facing constrained milk supply, a higher

proportion of business has remained in the

Australian market, with the proportion

of milk being exported falling from 50%

in 2006/07 to an estimated 45% in 2007/08.

With the stability of the domestic market

and healthy export markets available,

manufacturers have market and product

options. However, the domestic market may

be less attractive to some manufacturers

given the margin pressure from retailers

and their reluctance to allow full price

increases through to consumer products.

Expected supply response kicks in

Growth in world dairy supply has been

tracking below demand growth in recent

years. This has largely been the catalyst

for the recent upward surge in world dairy

prices, and has translated to stronger

farmgate returns. As a result, and with the

assistance of favourable weather in most

parts, a world-wide supply response

in milk production is now emerging.

This has put downward pressure of the

world market.

Australian supply potential has been

constrained by drought and a reduced

dairy herd, with limited prospects for

expansion in the short term.

In New Zealand, milk production growth was

adversely affected by drought in the first

quarter of 2008, which caused an estimated

4% decline in 2007/08 milk volumes. High

milk prices are expected to encourage

significant amounts of investment in

farm conversions and expansions in the

2008/09 season. In the longer term, high

land values and increasing environmental

constraints may curtail growth.

The EU has continued with reforms to

its Common Agricultural Policy. Export

subsidies on all products have been set

at zero for most of the 2007/08 year.

While the EU has increased production

quotas by 2% for 2008/09, its own analysis

indicates that output will remain within

these limits due to cost pressures and

farmer demographics.

The EU dairy sector is also benefiting

from increased consumption within

the expanded EU – now comprising

27 member states. Increased internal

cheese demand has seen a significant shift

in the EU product mix, away from butter

and powders, which are less attractive

to manufacturers without the market

support regime of the past.

US milk production is headed for a third

consecutive year of growth of 2% in 2008.

Higher milk volumes have enabled the

US dairy industry to grow its export

volumes of skim milk powder and,

to a lesser extent, butter and cheese. The

US has been a longstanding exporter

of commodity whey powder and lactose.

Sustained high feed prices and softer

milk prices are expected to temper milk

production growth in the next 18 months.

India, Argentina and Brazil are likely

to increase milk supply, however, local

consumption, government policy and

competition from other sectors will limit

export availability from these regions.

8

Australian Dairy Industry In Focus 2008


The Australian dairy industry

An important rural industry

The dairy industry is one of Australia’s

major rural industries. Based on a

farmgate value of production of $4.6 billion

in 2007/08, it ranks third behind the beef

and wheat industries. It is estimated

that approximately 40,000 people are

directly employed on dairy farms and in

manufacturing plants. Related transport

and distribution activities, and research

and development projects, represent

further employment associated with

the industry.

Dairy is also one of Australia’s leading

rural industries in terms of adding value

through further downstream processing.

Much of this processing occurs close

to farming areas, thereby generating

significant economic activity and

employment in country regions. ABARE

estimates this regional economic multiplier

effect to be in the order of 2.5 from the

dairy industry.

Dairying is a well-established industry

across the temperate and some subtropical

areas of Australia. While the bulk of milk

production occurs in south-east corner

of the country (80% in the three states

of Victoria, South Australia and Tasmania

in 2007/08), all states have dairy industries

that supply fresh drinking milk to nearby

cities and towns. A range of high-quality

consumer products, including fresh

milks, custards, yogurts and a wide

variety of cheese types, are produced

in most Australian states. Nevertheless,

the manufacturing of longer shelf life

products, such as cheese and bulk and

specialised milk powders, is steadily

becoming more concentrated in the

south-east region of Australia.

Strong growth characterised the dairy

industry through the 1990s, but that

growth has not continued in recent years.

The industry experienced a slow recovery

from the severe drought of 2002/03, only

to be impacted by dry conditions in the

past two years.

Table 2 details the long-term trends

in a number of key industry measures.

Figure 7 provides a comparison across

the five major agricultural industries

in Australia – comparing farmgate,

ex-factory sales and export sales values.

It graphically illustrates the value-adding

performance of the dairy industry, which,

together with the wine grape industry,

far outstrips the red meat, wheat and

wool industries.

Table 2

Australian dairy industry – long-term trends

CAGR

CAGR CAGR since

At June 30 1980 1990 1980s 2000 1990s 2008 (p) 1990

Milk production (mL) 5,432 6,262 1.4% 10,847 5.6% 9,223 2.2%

Dairy cows (’000) 1,880 1,654 -1.3% 2,171 2.8% 1,700 0.2%

Farm numbers 21,994 15,396 -3.5% 12,896 -1.8% 7,953 -3.6%

Value of farm production*($m) $3,069 $2,861 -0.7% $3,623 2.4% $4,575 2.6%

Value of ex-factory production*($m) $7,861 $7,066 -1.1% $10,888 4.4% $11,514 2.8%

Per capita consumption (milk equiv) 239 244 0.2% 274 1.2% 299 1.1%

Export value*($m) $927 $518 -5.7% $3,304 20.4% $2,882 10.0%

Export share of production 22% 31% 56% 45%

Sources: ABS, ADC, DA, State Authorities

*Expressed in 2007/08 dollars

Australian Dairy Industry In Focus 2008 9


Figure 7

Farmgate vs ex-factory vs export value of production – 2006/07

Farm

Ex-factory

Exports

$ million

$12,000

$10,000

$8,000

$6,000

$4,000

$2,000

$0

Wheat Red meat Dairy Wool Wine Sugar

Source: ABS

A world-competitive industry

Australian dairy farmers operate

in a deregulated and open market; the

only government involvement being in the

administration of food standards and food

safety assurance systems. Consequently,

international prices are the major

factor determining the price received

by farmers for their milk. At an average

of approximately US$25 per 100kg of milk,

Australian dairy farmers have generally

received a comparatively low price

compared to some producing countries

and so must operate highly cost-efficient

production systems. The fact that around

Figure 8

International farmgate milk prices (US$/100kg)

70

60

half of Australia’s milk production has

been exported in recent years reflects this

high level of competitiveness.

This is regularly borne out by international

comparisons; where Australian farms

consistently have costs of production in

the lower cost category of all farms in the

survey. This contrasts with participating

farms from Europe that have production

costs closer to US$30-35 per 100kg of milk.

However the prices received by farmers

have converged in the last year, with

Australian and New Zealand farmgate milk

prices increasing strongly in response to

strong world prices – as shown in Figure 8.

Canada

50

$US/100kg

40

30

20

US

NZ

EU 10

EU 15

10

0

Australia

Source: Dairy Australia

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

10

Australian Dairy Industry In Focus 2008


Farm facts

Australia’s climate and natural resources

are generally favourable to dairying and

allow the industry to be predominantly

pasture-based, with approximately 75%

of cattle feed requirements coming from

grazing years with ‘traditional’ seasonal

conditions. This results in efficient, lowcost,

high-quality milk production.

Most dairy production regions are located

in coastal areas, where pasture growth

generally depends on natural rainfall.

Nevertheless, the inland irrigation schemes

in northern Victoria and southern NSW

are significant, accounting for around

a quarter of national milk production.

Feedlot-based dairying remains the

exception in Australia, although the use

of supplementary feed – grains, hay and

silage – is widespread and has increased

significantly in the past two droughtaffected

seasons. According to the 2008

National Dairy Farmer Survey, some 93%

of dairy farms fed an average of 1.7 tonnes

of grain, grain mixes or feed

concentrates per cow during the

2007/08 season, up from an average

of 1.4 tonnes in 2006/07. While the

increase was most marked in the most

drought-affected regions, an increase was

seen in the majority of dairying regions

around Australia.

Owner-operated farms dominate the

Australian dairy industry, corporate farms

make up just 2% of the total, with share

farmers involved in 18% of local farms

in 2007/08. The number of dairy farms has

more than halved over the past 25 years,

from 22,000 in 1980 to 7,950 in 2008.

This reflects a long-term trend observed

in agriculture around the world, as

reduced price support and changing

business practices have encouraged a shift

to larger, more efficient operating systems.

Table 3

Number of registered dairy farms

NSW VIC QLD SA WA TAS AUST

1979/80 3,601 11,467 3,052 1,730 622 1,522 21,994

1989/90 2,220 8,840 1,970 969 496 901 15,396

1994/95 1,911 8,379 1,746 819 479 832 14,166

1995/96 1,853 8,275 1,693 791 457 819 13,888

1996/97 1,851 8,203 1,680 768 450 801 13,753

1997/98 1,817 8,084 1,642 749 440 746 13,478

1998/99 1,771 7,926 1,589 714 423 733 13,156

1999/00 1,725 7,806 1,545 667 419 734 12,896

2000/01 1,391 7,559 1,305 587 359 638 11,839

2001/02 1,323 7,079 1,152 538 344 612 11,048

2002/03 1,290 6,801 1,125 516 325 597 10,654

2003/04 1,096 6,242 967 458 305* 543 9,611

2004/05 1,063 6,108 885 402 278 507 9,243

2005/06 1,024 5,892 802 383 245 498 8,844

2006/07 924 5,346 734 354 222 475 8,055

2007/08 (p) 886 5,422 664 332 186 463 7,953

* Estimate Source: State Milk Authorities

Australian Dairy Industry In Focus 2008 11


The trends in farm numbers have meant

that the average herd size has increased

from 85 cows in 1980 to 215 in 2007/08.

The 2008 National Dairy Farmer Survey

indicated that 8% of dairy farms had

herd sizes of more than 500 cows and

produced 25% of the total milk produced

in Australia. At the other end of the

spectrum, 48% of farms had fewer than

200 cows and produced 24% of the milk.

The dominant breed in Australia

is the Holstein Friesian, accounting for

approximately 67% of all dairy cattle,

followed by the Jersey at more than 10%

and then the Holstein/Jersey cross.

More than 85% of dairy farmers use

artificial insemination and access some

of the best genetic material in the world.

The genetic evaluation of dairy cattle

is conducted by the Australian Dairy Herd

Improvement Service (ADHIS), using

one of the most sophisticated evaluation

systems available.

Improvements in herd genetics, pasture

management practices and supplementary

feeding regimes have seen the average

yield per cow increase from 2,850 litres

a year to around 5,250 litres over the past

25 years. Combining this increase in yield

per cow with the increase in average herd

size, the average annual milk production

per farm has increased from 247,000 litres

to 1,160,000 litres over the same period.

Unlike many countries around the world,

there is no legislative control over the

price milk processing companies pay

farmers for their milk. Farmgate prices

can vary between manufacturers, with

individual company returns being affected

by factors such as product and market

12

Table 4

Number of dairy cows (000 head)

NSW VIC QLD * SA WA TAS AUST

At March 31

1979/80 311 1,047 247 103 71 103 1,880

1989/90 238 968 201 89 64 92 1,654

1994/95 230 1,113 189 97 73 119 1,882

1995/96 235 1,161 189 97 71 130 1,884

1996/97 244 1,229 195 101 71 137 1,977

1997/98 266 1,268 203 107 73 143 2,060

1998/99 282 1,340 197 117 65 154 2,155

1999/00 289 1,377 195 105 65 139 2,171

At June 30

2000/01** 268 1,377 186 124 72 148 2,176

2001/02 264 1,363 174 110 75 134 2,123

2002/03 250 1,303 159 117 77 142 2,050

2003/04 248 1,297 171 116 74 133 2,038

2004/05 (e) 245 1,295 150 115 70 135 2,010

New Series***

2005/06 222 1,217 127 104 67 143 1,880

2006/07 (r) 213 1,157 122 105 54 133 1,786

2007/08 (e) 200 1,100 105 102 53 140 1,700

* For 1999 and 2000, Qld state figure included Northern Territory cow numbers

** From 2001 census date is June 30 and NT and ACT numbers are included in the national total

*** Change in ABS data collection Source: ABS and Dairy Australia

Australian Dairy Industry In Focus 2008


mix, marketing strategies and processing

efficiencies. Most milk prices are based

on both the milkfat and protein content

of the milk. Payments from processors

to individual farmers can also vary

marginally, as firms operate a range

of incentive/penalty payments related

to milk quality, productivity and off-peak

supplies. There are also volume incentives

in place to encourage milk supply to

particular processing plants to improve

operating efficiencies.

The price farmers receive also varies across

states, reflecting how milk is used in the

marketplace. For example, many farmers

in the southern regions receive a ‘blended’

price, incorporating returns from both

drinking and manufacturing milk.

However, higher prices are often received

for drinking milk under commercial

supply contract arrangements in the

northern dairy regions, where drinking

milk makes up a much larger proportion

of the production mix.

Farmgate prices reached record highs

in 2007/08, well above those of recent

seasons. The high prices paid reflected

both world dairy commodity prices and

strong competition for milk among the

processing companies within Australia.

Apart from the multitude of factors

affecting the milk prices received

by individual farmers, as outlined in the

preceding paragraphs, the value of the

Australian dollar in foreign exchange

markets against the US dollar and the

Euro was also critical in determining

company returns. In the 2001/02 season,

the Australian dollar was worth US$0.52,

compared to an average of nearly US$0.90

during the 2007/08 season.

This impact is clearly shown in

Figure 9 (overleaf). The Australian Export

Index represents the weighted average

value of a ‘basket’ of Australia’s major

dairy exports compared to a baseline set

at January 2000.

Table 5

Average annual milk production per cow

NSW VIC QLD SA WA TAS AUST

1979/80 2,870 3,012 1,984 3,163 3,105 2,958 2,848

1989/90 3,602 3,920 3,122 3,934 4,205 3,791 3,781

1994/95 4,519 4,653 3,964 5,057 4,609 3,781 4,550

1995/96 4,780 4,821 3,975 5,295 4,744 4,134 4,705

1996/97 4,972 4,715 4,152 5,396 4,915 3,968 4,682

1997/98 4,872 4,699 4,137 5,564 5,369 3,875 4,677

1998/99 4,691 4,919 4,144 5,763 5,835 4,063 4,831

1999/00 4,827 4,989 4,349 6,790 6,338 4,381 4,996

2000/01 4,687 4,977 3,943 6,369 5,903 4,177 4,859

2001/02 5,030 5,391 4,067 5,933 5,402 4,646 5,215

2002/03 4,996 4,885 4,230 6,556 5,348 4,304 4,913

2003/04 5,093 4,944 4,162 6,021 5,285 4,219 4,925

2004/05 4,925 5,101 3,735 5,862 5,418 4,497 4,983

2005/06 5,039 5,221 4,076 5,791 5,369 4,581 5,108

2006/07 (r) 5,151 5,261 4,033 6,417 5,235 4,696 5,182

2007/08 (e) 5,001 5,340 4,119 5,813 5,935 4,905 5,231

Source: Dairy manufacturers, ABS and Dairy Australia

Australian Dairy Industry In Focus 2008 13


The products included in the Index are

butter, cheese, skim milk powder and

wholemilk powder, and they are weighted

by their contribution to Australia’s dairy

export volumes. The Index takes into

consideration individual dairy product

export price fluctuations and movements

in the Australian/US dollar exchange rate.

The Index shows how export returns

were relatively higher in Australian

dollar terms early in the decade, when the

Australian dollar was ‘weaker’ compared

to the US dollar. The relativities have

reversed during the past five years.

The downward trend in inflation-adjusted

farmgate prices (Figure 10) is in line with

Table 6

Typical factory paid prices

2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 (p)

NSW cents/litre 32.5 32.8 30.9 32.9 34.3 35.7 48.6

$/kg milk solids 4.58 4.64 4.29 4.62 4.80 5.02 6.73

VIC cents/litre 33.3 24.8 26.7 31.5 32.9 32.0 50.0

$/kg milk solids 4.45 3.35 3.57 4.23 4.44 4.32 6.68

QLD cents/litre 34.5 34.8 33.8 35.0 36.6 38.8 51.8

$/kg milk solids 4.88 4.94 4.72 4.84 4.99 5.38 7.14

SA cents/litre 31.5 30.3 28.2 30.1 32.0 32.6 48.6

$/kg milk solids 4.38 4.22 3.90 4.19 4.49 4.57 6.75

WA cents/litre 28.8 28.2 27.4 27.2 29.0 32.0 41.3

$/kg milk solids 4.11 4.04 3.91 3.89 4.09 4.49 5.79

TAS cents/litre 32.7 25.9 27.2 30.9 33.6 36.5 50.2

$/kg milk solids 4.33 3.43 3.54 4.05 4.39 4.79 6.63

AUST cents/litre 33.0 27.1 27.9 31.5 33.1 33.2 49.6

$/kg milk solids 4.47 3.71 3.76 4.28 4.50 4.51 6.69

Source: Dairy manufacturers

Figure 9

Australian Export Index

350

Jan 2000 = 100

300

$US terms

250

200

150

$A terms

100

50

0

Jan 00

Jul 00

Jan 01

Jul 01

Jan 02

Jul 02

Jan 03

Jul 03

Jan 04

Jul 04

Jan 05

Jul 05

Jan 06

Jul 06

Jan 07

Jul 07

Jan 08

Jul 08

14

Australian Dairy Industry In Focus 2008

Source: Dairy Australia and ABS


eturns from other agricultural industries

over the past two decades. Despite the

occasional peaks – in 1992/93, 2001/02

and 2007/08 – the line has traditionally

returned to trend and clearly illustrates

the imperative to continually improve

productivity throughout the industry.

The annual ABARE Farm Survey estimates

the financial performance of Australian

dairy farms. The two main measures

are farm cash income (defined as total

cash receipts less total cash costs) and

farm business profit (which takes into

account the build up in trading stocks,

less depreciation and the value of farm

labour). Trends in farm cash income

and farm business profit have shown

increased variability over the past seven

years. Figure 11 illustrates how they

were strong in the year of record high

milk production volumes in 2001/02 –

encouraged by a combination of favourable

climatic and market conditions; fell due

to the dramatic impact of the drought

in the 2002/03 season; slowly recovered

and consolidated over the following three

years, before another financially crippling

drought in 2006/07; with financial recovery

in 2007/08 driven by high farmgate

milk prices.

Estimates from ABARE indicate that 15%

of dairy farms still experienced a negative

cash income in 2007/08 – down from

a figure of 36% in 2006/07; while 44%

of farms had a negative business profit

– down from 76% in the previous year.

Consequently, despite financial recovery

in average dairy farm returns, the range

of results was very wide.

Despite the significant economic pressures

on dairy farming operations in recent

years and increasing debt levels, it is

interesting to note that the level of farm

business equity, as estimated by ABARE,

continues to be above the long-term

average of 80% as the capital value of farm

land assets continues to steadily increase.

Figure 10

Factory paid prices (cents/litre)

60

50

Average prices adjusted for inflation

using index of farmer prices paid (ABARE)

40

Market milk price

30

Cents/litre

20

Manufacturing milk price

Weighted average of milk prices

to 30 June 2000

10

0

Deregulation

1988/89

1989/90

1990/91

1991/92

1992/93

1993/94

1994/95

1995/96

1996/97

1997/98

1998/99

1999/00

2000/01

2001/02

2002/03

2003/04

2004/05

2005/06

2006/07

2007/08(p)

Source: Dairy manufacturers and ABARE

Australian Dairy Industry In Focus 2008 15


Figure 11

Australian dairy farm financial performance

$150,000

$125,000

$100,000

$75,000

$50,000

$25,000

$0

($25,000)

($50,000)

($75,000)

($100,000)

Farm business profit

Farm cash income

1989/90

1990/91

1991/92

1992/93

1993/94

1994/95

1995/96

1996/97

1997/98

1998/99

1999/00

2000/01

2001/02

2002/03

2003/04

2004/05

2005/06

2006/07

2007/08 (p)

Source: ABARE

16

Australian Dairy Industry In Focus 2008


Milk production

While farm numbers have steadily

decreased over the past 25 years, milk

output had generally increased, due

to increasing cow numbers and improved

cow yields up until the major drought

of 2002/03. The following few years

were a period of consolidation for the

industry, with cow numbers and seasonal

conditions constraining production. The

past two seasons saw the return of drought

conditions across many dairying and

grain growing regions, which further

reduced cow numbers and resulted in two

years of contracting milk production.

Nevertheless, there have been significant

on-farm adaptation strategies emerging

to manage the highly variable conditions

of recent experience, particularly in the

inland irrigation regions of northern

Victoria, and central and southern inland

New South Wales.

However, the underlying trend has

continued to fewer farms, larger herds

Figure 12

Australian milk production vs indicies of farms and cows milked

12,000

Cows milked (index) Farm no. (index)

10,000

Milk production (million litres)

Million litres

8,000

6,000

4,000

140

120

100

80

60

40

Index

0

1985/86

1986/87

1987/88

1988/89

1990/91

1991/92

1992/93

1993/94

1994/95

1995/96

1996/97

1997/98

1989/90

1998/99

1999/00

2000/01

2001/02

2002/03

2003/04

2004/05

2005/06

2006/07

2007/08 (p)

0

2,000

20

Source: Dairy manufacturers, ABS, State Authorities and Dairy Australia

Figure 13

Seasonality of milk production in Australia, 2007/08 (million litres)

1,200

1,000

800

600

400

200

0

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Source: Dairy manufacturers

Australian Dairy Industry In Focus 2008 17


and increasing levels of milk production.

Farmers have made many changes to their

general farm management practices and

adopted a range of improved technologies,

including soil testing, fodder conservation,

supplementary feeding, improved animal

genetics, artificial insemination programs,

the use of new milking equipment and

techniques, and the widespread use

of computers to record and monitor

herd performance.

Australian milk production remains

strongly seasonal, reflecting the pasturebased

nature of the industry. Milk

production peaks in October/November

and tapers off in the cooler months of

May/June. The production of long shelflife

manufactured products, particularly

in the south-east regions, has enabled

maximum milk utilisation within the

seasonal cycle. However, the seasonality

of milk output in Queensland, New South

Wales and Western Australia is much

less pronounced, due to a greater focus

on drinking milk and fresh products in

the product mixes of these states. Farmers

in these states manage calving and

feed systems to ensure more even

year-round production.

See Appendix 2 for more details on the

seasonality of milk production by state.

Australian milk production decreased

by 360 million litres, or 3.8%, to 9,223

million litres in 2007/08. This reflected the

continuation of difficult conditions around

the country during the season; with

Tasmania the only region to show growth

over the previous year.

Table 7

Milk production (million litres)

NSW VIC QLD SA WA TAS AUST

1979/80 907 3,151 508 329 222 315 5,432

1989/90 879 3,787 629 356 267 344 6,262

1994/95 1,087 5,114 740 485 343 437 8,206

1995/96 1,114 5,482 751 512 341 514 8,714

1996/97 1,192 5,634 797 535 349 529 9,036

1997/98 1,242 5,866 822 580 387 543 9,440

1998/99 1,286 6,414 827 646 403 603 10,178

1999/00 1,395 6,870 848 713 412 609 10,847

2000/01 1,326 6,784 760 699 388 590 10,546

2001/02 1,343 7,405 744 715 393 671 11,271

2002/03 1,302 6,584 720 733 404 585 10,328

2003/04 1,271 6,434 674 703 404 590 10,076

2004/05 1,218 6,613 619 679 398 600 10,127

18

New series*

2005/06 1,197 6,651 597 646 377 622 10,089

2006/07 1,105 6,297 534 655 350 642 9,583

2007/08 (p) 1,049 6,102 485 606 319 662 9,223

* From July 2005, data collection based on farm location

Source: Dairy manufacturers

Australian Dairy Industry In Focus 2008


Milk production is concentrated in the

south-east corner of Australia, with

Victoria, Tasmania and South Australia

accounting for 80% of the national output.

Cows’ milk consists of solids (milkfat,

protein, lactose and minerals) in water,

with water making up about 87% of the

volume. Milk composition varies between

regions due to a number of factors, such

as cow breed and age, nutrition and feed

quality, as shown in Table 8.

The industry has traditionally been

divided into two distinct sectors. The

volumes going into the drinking milk

sector have shown steady growth over

recent years and last year accounted for

24% of the total milk production.

The long-term trends of expanding total

milk output, declining drinking milk

share of production and an increasing

proportion of milk used for manufacturing

dairy products have been reversed over the

past six years, as shown in Figure 14.

The variation in the proportion of drinking

milk to manufacturing milk by state

is shown in Figure 15. It clearly illustrates

the points made earlier about the greater

focus on drinking milk in the product

mix in Queensland, New South Wales and

Western Australia.

Table 8

Average protein/fat composition by state (%)

NSW VIC QLD SA WA TAS AUST

Milkfat

2001/02 3.89 4.14 3.93 3.96 3.98 4.28 4.09

2002/03 3.87 4.12 3.93 3.94 3.98 4.26 4.06

2003/04 3.94 4.16 3.95 3.96 3.98 4.32 4.10

2004/05 3.89 4.12 3.99 3.94 3.87 4.28 4.07

2005/06 3.91 4.08 4.00 3.88 3.91 4.29 4.05

2006/07 3.88 4.09 3.98 3.90 3.93 4.25 4.05

2007/08 (p) 3.97 4.14 4.01 3.95 3.95 4.20 4.10

Protein

2001/02 3.21 3.33 3.14 3.22 3.11 3.29 3.29

2002/03 3.21 3.27 3.13 3.24 3.11 3.29 3.24

2003/04 3.26 3.34 3.21 3.27 3.15 3.36 3.31

2004/05 3.23 3.32 3.23 3.24 3.11 3.35 3.29

2005/06 3.25 3.33 3.33 3.25 3.16 3.37 3.31

2006/07 3.24 3.33 3.22 3.25 3.20 3.37 3.30

2007/08 (p) 3.25 3.34 3.25 3.25 3.19 3.39 3.32

Source: Dairy manufacturers

Australian Dairy Industry In Focus 2008 19


Figure 14

Drinking and manufacturing milk production (million litres)

Milk for

manufacturing

Drinking milk

12,000

10,000

8,000

Million litres

6,000

4,000

2,000

0

1994/95

1995/96

1996/97

1997/98

1998/99

1999/00

2000/01

2001/02

2002/03

2003/04

2004/05

2005/06

2006/07

2007/08(p)

Source: Dairy manufacturers

Figure 15

Milk production – shares by state, 2007/08

Drinking milk

Milk for

manufacturing

NSW

VIC

QLD

SA

WA

TAS

AUST

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Source: Dairy manufacturers

20

Australian Dairy Industry In Focus 2008


Dairy manufacturing

As in the farm sector, the milk processing

sector is undergoing continuing

rationalisation. This has resulted

in improved factory capacity, as larger

operations have improved their efficiency

and economies of scale. The lack of growth

in milk production over the past six years

has relieved the pressure on Australian

dairy companies to continue to invest

in increasing processing capacity – at least

in the short to medium term. Instead, the

challenge has been to utilise the existing

capacity as profitably as possible.

The Australian dairy manufacturing sector

is diverse and includes farmer-owned

co-operatives, and public, private and

multi-national companies. Co-operatives

no longer dominate the industry, but still

account for approximately 49% of the milk

output. While the largest co-operative

(Murray Goulburn) accounts for 35%

of Australia’s milk production, there are

also a number of small to medium-sized

co-operatives with milk intake volumes

between 100 and 1,000 million litres,

including Dairy Farmers, Norco

and Challenge.

Other Australian dairy companies cover

a diverse range of markets and products,

from the publicly listed Warrnambool

Cheese and Butter Factory, to Bega Cheese

Limited and Tatura Milk Industries,

to many highly specialised farmhouse

cheese manufacturers.

Major multi-national dairy companies have

operated in the Australian dairy industry

for many years and currently include

Fonterra, Kirin and Parmalat.

The major manufactured product

streams are:

• drinking milk – fresh and

UHT long-life;

• skim milk powder (SMP)/buttermilk

powder (BMP)/butter;

• butter/casein;

• cheese;

• wholemilk powder (WMP);

• other consumer products, such as

yogurts, custards and dairy desserts; and

• specialised ingredients, such as whey

proteins, nutraceuticals, etc.

In line with international trends, there has

been a general shift in Australia’s product

mix towards increased cheese and WMP

production, and away from butter and SMP

lines. However, strong commodity prices

in the middle of the decade saw a significant

re-balancing of company product mixes

back towards SMP and butter for a couple

of years, as firms took advantage of the

higher relative export returns available

from these products. The general trend

resumed during the 2007/08 season.

Around 60% of manufactured product (in

milk equivalent terms) is exported and the

remaining 40% is sold on the Australian

market. This contrasts with drinking

milk, where some 97% is consumed in the

domestic market.

See Appendix 3 for more details on the

manufacturing processes.

Figure 16

The utilisation of Australian milk in 2007/08

Cheese 36%

Drinking milk 24%

WMP 12%

Casein/butter 4%

SMP/butter 20%

Other 4%

Source: Dairy Australia

Australian Dairy Industry In Focus 2008 21


Dairy markets

Over the past two decades Australian milk

production has been above that volume

required for domestic consumption,

so that a significant proportion is destined

for export markets. The share of total

production exported has ranged from

40-60% over the period shown in Figure

17. Last year Australia exported around

45% of its milk production – the lowest

proportion since the mid-1990s, due to the

reduced availability of product for export.

While Australia accounts for an estimated

2% of the world’s milk production, it is

an important exporter of dairy products.

Australia ranks third in terms of world

dairy trade – with an 11% share – behind

New Zealand and the European Union.

Japan is the single most important export

market for Australia, accounting for 20%

of exports by value. Australian exports are

concentrated in Asia, which represented

69% of the total dairy exports value

of A$2.9 billion in 2007/08.

Figure 17

Australian consumption and exports (milk equivalents)

Exports Share exported

12,000

Domestic

10,000

60%

50%

Million litres

8,000

6,000

4,000

2,000

40%

30%

20%

10%

0

1994/95

1995/96

1996/97

1997/98

1998/99

1999/00

2000/01

2001/02

2002/03

2003/04

2004/05

2005/06

2006/07

2007/08(p)

0%

Source: Dairy manufacturers and ABS

Table 9

Australian dairy markets by product, 2007/08 (A$ million)

Sth East Other Middle Australian

Asia Asia Europe East Africa Americas Other Total market (e)

Butter/AMF 65 51 30 23 6 17 2 194 295

Cheese 95 541 64 161 32 43 29 966 1,368

Milk 31 26 2 8 1 1 15 84 2,877

SMP 312 87 1 85 11 9 3 508 n/a

WMP* 300 143 2 59 47 45 16 611 n/a

Other ** 119 204 25 13 4 81 73 519 1,885

22

Total 923 1052 124 348 102 195 138 2,882 6,425

Source: Dairy Australia estimates and ABS

*Also includes infant powder ** Includes consumer products such as ice-cream, custards, etc

and mixtures, but excludes industrial / ingredient usage

Australian Dairy Industry In Focus 2008


This concentration of exports in Asia/East

Asia reflects both Australia’s geographic

proximity to these markets and the extent

to which Australia is excluded from other

major markets by direct restrictions (as

in the case of the European Union) or the

impact of the export subsidy programs

of major competitor countries.

The Asian markets have considerable

potential for consumption growth

as incomes rise and diets become more

‘westernised’. Australian dairy companies

have proven track records in supplying

these markets over a number of decades.

The Middle East and the Americas are also

becoming increasingly important markets

for many Australian exporters.

Australia’s top five export markets

by volume in 2007/08 were Japan,

Singapore, Malaysia, Indonesia and

China; while the top five export markets

by value were slightly different in Japan,

Singapore, Malaysia, Indonesia, and China,

which displaced Saudi Arabia from fifth

position in 2007/08.

See Appendix 5 for detailed tables

of Australia’s export markets.

Figure 18

Exporters’ share of world trade in 2007

(milk equivalents)

Australia 11%

Other 9%

Ukraine 3%

Argentina 4%

US 8%

New Zealand 33%

EU 32%

Source: Dairy Australia and ABS

Figure 19

Australian exports by region, 2007/08 (A$ million)

South-East Asia $923m

Japan $581m

Other Asia $471m

Europe $124m

Middle East $348m

Africa $102m

Americas $195m

Other $138m

Source: ABS

Table 10

Top 10 Australian export destinations, 2007/08

Volume – % Value – %

Country Tonnes Total Country A$ million Total

Japan 132,033 18% Japan 581 20%

Singapore 76,303 11% Singapore 243 8%

Malaysia 50,985 7% Malaysia 206 7%

Indonesia 48,734 7% Indonesia 195 7%

China 46,502 6% China 164 6%

Philippines 38,152 5% Saudi Arabia 155 5%

Saudi Arabia 33,987 5% Philippines 134 5%

Hong Kong 30,868 4% United States 116 4%

Thailand 30,659 4% Thailand 113 4%

New Zealand 27,086 4% New Zealand 102 4%

Source: Dairy Australia and ABS

Australian Dairy Industry In Focus 2008 23


Australian consumption

of dairy products

The major Australian consumer dairy

products are drinking milk, cheese, butter

and butter blends, and yogurt.

Per capita consumption trends over

the past two decades have varied quite

significantly by individual product. These

trends reflect changes in consumer tastes

and preferences in response to a multitude

of variables, such as multicultural

influences on food trends, health

perceptions about dairy products and

manufacturers’ responses (such as lowfat

variants), new product development,

flavour and packaging innovations,

competitive category offerings, and the

distribution and availability of products.

Per capita consumption of drinking milk

is estimated at 104 litres and has increased

over the past five years, reversing

a downward trend that started in the

mid-1990s.

Cheese consumption has stabilised

at between 11.5kg and 12kg in recent

years, with an on-going shift from cheddar

to non-cheddar varieties.

Butter consumption slowed since the 1970s,

as people limit their intake of saturated

fats. However, dairy blends with the

perceived ‘naturalness’ of butter products

have experienced growing popularity in

the past decade.

Yogurt is the ultimate ‘healthy snack’ for

time-pressed consumers, combining both

convenience and health attributes, and has

generally shown consistent growth.

Table 11

Per capita consumption of major dairy products (litres/kg)

Milk Cheese Butter/Blends Yogurt

(L) (kg) (kg) (kg)

2001/02 98.5 11.6 3.4 5.6

2002/03 98.3 12.1 3.4 5.8

2003/04 99.0 11.5 3.6 6.1

2004/05 (r) 100.2 11.3 4.1 6.6

2005/06 (r) 100.5 11.7 3.9 7.0

2006/07 (r) 103.0 12.0 3.8 7.1

2007/08 (p) 104.1 11.8 4.1 6.9

Source: Dairy manufacturers and Dairy Australia

Figure 20

Per capita consumption (litres/kg)

Other dairy products (kg)

12.0

10.0

8.0

6.0

4.0

2.0

0

1985/86

1986/87

1988/89

1989/90

1990/91

1991/92

1992/93

1993/94

1994/95

1995/96

1996/97

1997/98

1987/88

1998/99

Milk

Cheese

Yogurt

1999/00

2000/01

2001/02

2002/03

2003/04

2004/05

2005/06

2006/07

2007/08(p)

Butter/Blends

100

80

60

40

20

0

Drinking milk (litres)

24

Australian Dairy Industry In Focus 2008

Source: Dairy manufacturers and Dairy Australia.


Drinking milk

Regular or wholemilk is standardised

to a milkfat content of around 3.8%.

Modified, reduced and low-fat milks

are standardised to other specifications,

with varying milkfat and solids non‐fat

levels. The cream removed during

standardisation can be bottled as table

cream or manufactured into butter or other

dairy products.

Australian milk consumption has been

steadily shifting from regular milk

to modified milk types, such as reduced

Table 12

Drinking milk sales by state (million litres)

NSW ACT VIC QLD SA WA TAS AUST

1979/80 531 437 249 127 119 41 1,504

1989/90 552 30 449 316 150 164 47 1,730

1994/95 579 34 452 368 167 188 52 1,894

1995/96 574 33 454 372 163 187 50 1,905

1996/97 576 33 452 376 173 193 50 1,920

1997/98 575 33 442 377 182 188 49 1,919

1998/99 578 32 442 382 185 192 49 1,931

1999/00 566 30 440 383 185 190 48 1,933

2000/01 633 456 393 201 201 50 1,934

2001/02 626 460 403 185 200 50 1,924

2002/03 620 474 404 183 208 52 1,941

2003/04 627 476 418 196 212 52 1,981

2004/05 641 486 429 200 215 53 2,024

2005/06 656 495 445 198 218 53 2,065

2006/07 684 509 475 207 230 55 2,160

*2007/08 (p) 682 527 499 205 237 55 2,205

*New Series State figures exlude interstate-traded milk prior to 2001 NSW includes ACT after June 2000

Source: Milk processors and State Milk Authorities

Table 13

Drinking milk sales by type (million litres)

Regular Reduced Low Fat Flavoured UHT Total

1989/90 1,257 244 79 111 40 1,730

1994/95 1,231 332 111 143 77 1,894

1995/96 1,215 336 113 146 94 1,905

1996/97 1,184 352 120 160 104 1,920

1997/98 1,144 359 130 163 122 1,919

1998/99 1,131 358 141 169 131 1,931

1999/00 1,099 354 144 173 164 1,933

2000/01 1,098 386 119 165 165 1,934

2001/02 1,088 400 126 172 138 1,924

2002/03 1,079 406 134 178 143 1,941

2003/04 (r) 1,067 433 140 191 150 1,981

2004/05 (r) 1,078 457 138 200 152 2,024

2005/06 (r) 1,088 478 140 204 156 2,065

2006/07 (p) 1,111 511 147 216 175 2,160

**new series Full Cream Reduced No Fat Flavoured UHT Total

2007/08 (p) 1,129 560 118 213 185 2,205

Source: Milk processors and State Milk Authorities

Australian Dairy Industry In Focus 2008 25


26

and low-fat milks, over a number of years.

However, this trend slowed in 2007/08,

as consumers responded to rapidly

increasing retail prices by switching

to the relatively lower-priced regular full

cream milks. Similarly, sales of flavoured

milks were also affected by a combination

of increasing dairy and petrol prices,

as flavoured milk is an impulse purchase

for many consumers, bought in the petrol

and convenience retail sales channel. UHT

milk volumes continued to show the same

marginal growth pattern of recent years.

The major players in the Australian

drinking milk market are National Foods

(Pura brand), Dairy Farmers (Dairy

Farmers brand) and Parmalat (Pauls

brand); together with a number of smaller

players with strong regional brands.

The supermarket channel’s share of

Australian drinking milk sales stabilised

at 55% in 2007/08, after increasing from

49% in 1999/00 to reach 57% in 2005/06.

Private label brands account for 56%

of total supermarket milk volumes,

up from 25% in 1999/00. Their average

price is significantly less than branded

product. This lower average price is due

to a combination of product and pack size

mix – with a greater proportion of private

label purchases being bulk regular full

cream milk.

On the packaging front, plastic bottles now

account for 80% of all milk sales in supermarkets,

with the balance split nearly evenly

between gable-top cartons and UHT packs.

There have also been significant movements

within the pack sizes bought by consumers

in supermarkets. While the 2-litre plastic

bottle remains the most popular size, with

a 40% share, this is down from 49% eight

years ago. Similarly, the combined share

of 1-litre cartons and plastic bottles has

slipped from 33% to 20%. The major

change has been in the explosive growth

Australian Dairy Industry In Focus 2008

of the 3-litre plastic bottle, increasing

its share of all supermarket milk sales

from 13% to 36% since it first appeared

in June 1998.

In 2007/08, the average price of branded

milk increased 11.2% to $2.09 per litre and,

when combined with a 3.4% increase in the

average private label price to $1.22 per

litre, delivered an increase in the average

supermarket price of 11cpl to $1.60 per litre.

Supermarket sales volumes grew by 3%

in 2007/08, despite average retail prices

increasing 7% during the year. Nevertheless,

the comparative sales performance between

branded and private label milks did vary

markedly.

See Appendix 4 for more details

on supermarket milk sales.

Australia exports relatively small volumes

of milk – predominantly as UHT product –

with 77% of the total going into the Asian

region and 16% into the island countries

of the Pacific region.

See Appendix 5 for more details of drinking

milk exports.

Figure 21

Supermarket milk price trends ($/litre)

$2.50

$2.00

$1.50

$1.00

$0.50

$0.00

2002/03

Branded milk

Private label milk

2003/04

2004/05

2005/06

All milk

2006/07

2007/08

Source: AC Nielsen and Dairy Australia


Cheese

Australia produced 358,900 tonnes

of cheese in 2007/08 – a 1.3% decrease

on the previous year. While the production

of cheddar, semi-hard and hard grating

cheese types decreased on the previous

year – due to milk availability – the

production of fresh and mould cheeses

was particularly strong.

The trend away from cheddar cheeses

towards non-cheddar cheese types has

been apparent in both the production and

consumption data for Australia for some

time. In the six years covered in Table 14,

the non-cheddar share of total production

has increased from 44% to 52%.

It is estimated that some 60% of the

domestic sales of Australian cheese are

through supermarkets. Consequently,

a significant proportion – mostly specialty

cheeses – is sold through the smaller

independent retail trade, with the

remainder used in the foodservice sector

and in food processing applications.

Cheese is a major product for the

Australian dairy industry, with sales of

180,000 tonnes within Australia, valued

at an estimated A$1.4 billion, and export

sales of 202,650 tonnes, worth more than

A$966 million in 2007/08.

Supermarket sales volumes contracted by

2% in 2007/08, due to average retail prices

increasing 11% during the year. This

contributed to the marginal decline in per

capita consumption observed previously

in Table 11.

See Appendix 4 for more details

of supermarket cheese sales.

Cheese imports accounted for nearly

28% of estimated domestic sales last

year. In 2007/08, 71% of the 69,700 tonnes

of cheese imported into Australia was

sourced from New Zealand. The bulk

of the remaining cheese imports came

from Europe.

Japan remained Australia’s most important

overseas cheese market in 2007/08 and

accounted for 48% of product exports,

followed by Saudi Arabia and the United

States. Australian cheeses were exported

to more than 70 countries around the

world last year.

The trend away from cheddar cheeses

to non-cheddar cheese types evident in the

domestic market is also being reflected

in Australia’s cheese exports; the noncheddar

share of total export sales has

steadily increased from 45% to 59% over

the past eight years.

Table 14

Australian cheese production by type of cheese

2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 (p)

Cheddar 212,810 207,795 195,887 191,693 179,159 171,241

Semi-hard 83,973 88,712 90,714 76,813 75,529 72,597

Hard Grating 12,118 11,333 13,267 23,022 18,477 17,451

Fresh 64,110 70,880 83,649 75,441 84,443 89,645

Mould 5,955 5,042 4,833 5,847 6,030 7,955

Total Cheese 378,966 383,762 388,350 372,816 363,638 358,889

Source: Dairy manufacturers

Australian Dairy Industry In Focus 2008 27


Butter

In 2007/08, Australia produced 127,600

tonnes of butter and anhydrous milkfat

(AMF) or butteroil in commercial butter

equivalent terms (CBE) – a 4.1% decrease

on the previous year.

AMF is butter with the water removed.

It is primarily produced for export and

domestic food processing applications,

such as bakery and confectionery. These

sectors also use butter, but most domestic

butter sales are through retail and

foodservice outlets.

The introduction of butter and vegetable

oil-based dairy blends, which are easier

to spread and lower in saturated fat, has

helped to stabilise this market in the 1990s,

after a sustained decline from the 1970s.

Nevertheless, Australia’s total retail

market for tablespreads has steadily

decreased in size over the past eight years.

Consumer concerns about margarine

consumption have meant a continuing

decline of more than 3% in the latest year;

with dairy spreads taking further retail

market share from margarine. This has

been a continuing trend over the past

eight years, as dairy spreads’ share of the

category has steadily increased from 30%

in 2000/01 to 42% in 2007/08.

It is estimated that some 50% of the

domestic sales of Australian dairyspreads

are through supermarkets.

Interestingly, supermarket sales volumes

grew by 2% in 2007/08, despite average

retail prices increasing 10% during

the year.

See Appendix 4 for more details

of supermarket butter and dairy blend sales.

Australian exports of butter and AMF

vary significantly from year to year, with

a declining trend over the five years

to 2004/05. However, Australian butter/

AMF exports increased significantly in the

following two years, in response to strong

world commodity prices, before falling

away again last year to 57,200 tonnes,

which was worth A$194 million.

Australia’s most important overseas

markets for butter/AMF were Singapore,

Japan and South Korea.

See Appendix 5 for more details of butter and

AMF exports.

Table 15

Butter and AMF production (tonnes)

2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 (p)

Butter/Butter Blends (CBE) 103,377 104,143 105,131 92,850 101,666 99,202

AMF (CBE) 60,343 44,754 41,528 52,904 31,434 28,416

Source: Dairy manufacturers

Table 16

Australian exports of butter and AMF (tonnes)

2002/03 2003/04 2004/05 2005/06 2006/07 (r) 2007/08 (p)

Butter 49,529 41,942 37,900 35,525 44,279 34,678

AMF (CBE) 59,947 41,201 31,611 46,816 36,689 22,516

Source: Dairy Australia and ABS

28

Australian Dairy Industry In Focus 2008


Fresh and frozen dairy products

Australian manufacturers produce a range

of fresh dairy products, including yogurts,

dairy desserts, chilled custards and

creams, dairy dips and frozen products

such as ice-cream.

Yogurts have been a category

of considerable growth for the dairy

industry over the past two decades,

due to their favourable consumer

image as a convenient, healthy snack.

The segment is dominated by strong

international brands, such as Ski,

Yoplait and Nestlé.

Growth in yogurt sales has been

underpinned by regular product

innovation in the areas of packaging,

flavour combinations and the use

of probiotic cultures, as well as new

products, such as drinking yogurts.

Marketing support in terms of advertising

new product ranges and flavour

innovations are important in

encouraging consumer trial and

subsequent category growth.

Dairy desserts are a low volume – high

value dairy category with slowly declining

volumes in recent years. Marketed as an

indulgence or treat item, these products

are generally targeted to adult consumers

and include mousses, crème caramels

and fromage frais. Children’s products

include fromage frais and flavoured

custards that often feature popular cartoon

characters on-pack.

Chilled custards, a traditional favourite,

have shown marginal growth in recent

years as manufacturers have expanded

their product offerings into small, snacksized

plastic cups sold in multi-packs.

The overall market for cream has

declined in recent years. Regular and

sour creams are both used extensively

as accompaniments or ingredients, but

are facing significant competition on the

health front, often from other dairy

products, such as natural yogurt.

Dairy dips are another low volume

– high value dairy category showing

volume growth in recent years. Flavour

innovations have been particularly

successful in maintaining the consumer

appeal of another traditional favourite

in the dairy case.

Australia’s consumption of ice-cream

is relatively high by world standards –

generally reported at 18 litres per head

and third only to New Zealand and

the United States. The market is stable

in volume terms, if highly seasonal

in certain segments, stick lines particularly.

The major market development in recent

years has been premium indulgent

treats, in both stick lines and smallersized

take-home tubs. Refreshing fruitbased

products are also popular with

consumers seeking a healthy option within

the category.

Nevertheless, sales of larger tubs (2-litre

or greater) and multi-packs of stick lines

continue to make up the majority of sales

in supermarkets, while mid-range stick

lines and ice-cream cones are the major

volume products in the route trade.

Once again, strong international brands,

such as Streets, Nestlé (Peters) and

Cadbury, dominate the category.

Australian Dairy Industry In Focus 2008 29


Milk powders

Australian manufacturers produce a range

of milk powders. New technology used

in the production and use of powders has

seen the range of specifications available

from Australian manufacturers expand

in line with customers’ needs.

In the years up until the peak production

season of 2001/02, the most obvious trend

in powder production was an increase

in wholemilk powder (WMP) output,

with skim milk powder (SMP) production

remaining relatively stable. Since 2002/03,

total volumes of milk powders have been

most affected by the reduced availability

of milk and the trend has changed. The

production of both forms of powder fell

sharply, followed by similar patterns

of recovery, with WMP volumes making

up nearly half the total milk powder

production of the past four years. Strong

commodity prices in recent years saw

a significant re-balancing of company

product mixes from 2005/06 towards

SMP (and butter/butteroil) to take

advantage of the higher relative export

returns available from these products.

Nevertheless, last year saw a trend back

towards WMP with production growing

5%, while SMP production declined 14%.

Less than 15% of Australia’s powder

production is sold domestically. Retail

outlets account for only a small percentage

Figure 22

Australian production and exports of skim milk powder (tonnes)

Production 250,000

Exports

200,000

Tonnes

150,000

100,000

50,000

Figure 23

Australian production and exports of wholemilk powder (tonnes)

Production

Exports

Tonnes

0

240,000

210,000

180,000

150,000

120,000

90,000

60,000

30,000

0

2002/03

2003/04

2002/03

2003/04

2004/05

2004/05

2005/06

2005/06

2006/07

2006/07

2007/08(p)

Source: Dairy manufacturers and ABS

2007/08(p)

Source: Dairy manufacturers and ABS

30

Australian Dairy Industry In Focus 2008


of domestic sales, with local usage being

mainly as a food ingredient.

Exported milk powder is often recombined

into liquid milk products, particularly

in tropical climates where fresh milk

supplies are not available. It is also

used in bakery products (improving the

volume and binding capacity of bread,

and ensuring crisper pastry and biscuits),

confectionery and milk chocolates,

processed meats, ready-to-cook meals,

baby foods, ice-cream, yogurt, health foods

and reduced-fat milks. Industrial-grade

powder is used for animal fodder.

The major export markets for Australian

milk powders are concentrated in Asia,

with 77% of SMP export volumes and 72%

of WMP destined for the region in 2007/08.

See Appendix 5 for more details

on powder exports.

Singapore was the largest single export

market for Australian SMP, followed

by Indonesia, Malaysia, the Philippines

and Thailand.

Singapore was also the largest single

export market for Australian WMP,

followed by Malaysia, Indonesia, China

and Thailand.

Table 17

Australian production of milk powders (tonnes)

2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 (p)

Skim milk powder 196,608 182,056 189,113 205,495 191,475 164,315

Wholemilk powder* 198,306 186,860 189,220 158,250 135,364 141,974

* includes infant powders Source: Dairy manufacturers

Table 18

Australian exports of skim milk powder by region (tonnes)

2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 (p)

Asia 132,459 121,962 112,848 147,507 126,793 92,590

Middle East 12,405 10,401 9,136 19,042 19,878 22,010

Africa 7,675 4,847 6,352 3,704 6,023 2,408

Pacific 271 315 725 1,032 1,258 509

Americas 13,322 8,298 4,069 4,067 5,266 1,983

Europe 142 354 98 235 1,111 313

Others 1 0 0 17 0 0

TOTAL 166,275 146,177 133,228 175,604 160,329 119,813

Source: Dairy Australia and ABS

Table 19

Australian exports of wholemilk powder by region (tonnes)

2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 (p)

Asia 153,778 127,188 114,566 123,039 99,837 90,182

Middle East 22,221 21,354 24,232 10,420 18,499 12,151

Africa 13,677 12,738 7,732 12,404 10,069 9,504

Pacific 4,778 6,970 6,803 5,879 3,474 2,761

Americas 5,720 3,452 6,713 13,068 11,111 10,327

Europe 185 1,700 411 26 450 198

Others 0 0 0 0 0 0

Total 200,359 173,402 160,457 164,836 143,440 125,123

*Includes infant powders Source: Dairy Australia and ABS

Australian Dairy Industry In Focus 2008 31


Whey products and casein

Whey is a by-product of the cheesemaking

process. Traditionally this product was

disposed of in liquid form. However,

recognition of the value of whey’s

components has seen the production

of whey powders and protein concentrates

increase significantly in recent years.

Food-grade whey powder is used in the

manufacture of ice-cream, bakery products

(cakes, biscuits), chocolate flavouring,

infant formula, yogurt, beverages and

processed meat. Industrial uses include

animal feed (for pigs, horses and poultry),

calf milk replacer and even as a carrier

for herbicides.

Whey protein concentrates are used

in snack foods, juices, confectionery,

ice-cream, biscuits, processed meats,

(milk) protein drinks, desserts, infant

foods and dietetic products. Products

such as cosmetics, skin creams, bath

salts and detergents also contain

protein concentrates.

Approximately 25% of Australia’s whey

production is used domestically in the

manufacture of infant formula, biscuits

and ice-cream. The remainder is exported,

with Indonesia, China, Thailand,

Singapore and the Philippines being the

largest export markets for Australian whey

powders in 2007/08.

Casein and caseinates are ingredients

in noodles, chocolate, sweets, mayonnaise,

ice-cream and cheese manufacture.

They are used as binding ingredients,

emulsifiers and milk substitutes

in processed foods. Industrial uses

of casein and caseinates include:

plastics (buttons, knitting needles); the

manufacture of synthetic fibres and

chemicals (plants, glues, glazed paper,

putty and cosmetics); as a reinforcing

agent and stabiliser for rubber

in automobile tyres; a nutritional

supplement and binder in calf milk

replacers; and a range of other

technical applications.

The majority of Australia’s production

of casein and caseinates is for export

markets. The United States and Japan

have been the largest export markets

in recent years.

Figure 24

Production and export of whey products (tonnes)

Production

120,000

Exports

110,000

100,000

90,000

80,000

Tonnes

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0

1999/00

2000/01

2001/02

2002/03

2003/04

2004/05

2005/06

2006/07

2007/08(p)

32

Australian Dairy Industry In Focus 2008

Source: Dairy manufacturers and ABS


Industry organisations and structure

The Australian dairy industry is diverse,

incorporating primary production,

manufacturing and marketing.

Accordingly, a number of bodies

represent the various sectors and

provide a framework for the industry

to work together.

Dairy Australia

Dairy Australia is the industryowned

national service organisation.

Formed on 1 July 2003, Dairy Australia

replaced the Australian Dairy

Corporation and the Dairy Research and

Development Corporation.

Dairy Australia is a company limited

by guarantee, operating under the

Corporations Act 2001. It is fully

accountable to its members – those levy

payers who elect to become members – and

the peak industry bodies.

The structure provides farmers,

as members, with a direct say in the

activities of the organisation. To help

the Australian dairy industry achieve

its vision of growing an internationally

competitive, innovative and sustainable

industry, the organisation is delivering

increased effectiveness through the

integration and co-ordination of activities

to provide better value for farmers’ levy

investment. Together with the farmerpaid

levy, the company receives matching

Federal government research and

development funds.

Building platforms for successful

collaboration across the dairy supply

chain is at the heart of Dairy Australia’s

mission to develop and drive industry

services and innovation for the ultimate

benefit of the Dairy Services Levy payers.

The organisation does not limit its

investment and services to direct farmbased

activities, but works across the

dairy supply chain – from farm through

manufacturing to domestic and export

markets – profitably linking business

partners in order to:

• increase returns, or reduce costs,

to lift business margins;

• deliver better or faster outcomes

than businesses can achieve

individually; and

• improve understanding of the

dynamics of change across the dairy

chain

to thereby boost the long-term

sustainability and viability of local farm

businesses and the regional communities

that depend on dairy.

Figure 25

Dairy Australia’s planned expenditure by business objectives for 2009 to 2013

Increase farm productivity 45%

Promote and protect the

unique benefits of Australian dairy 26%

Develop value-added,

high-margin markets, channels and products 29%

Source: Dairy Australia Strategic Plan 2009-13

Australian Dairy Industry In Focus 2008 33


For the current 2009-13 planning cycle,

Dairy Australia’s core objectives are to:

1. Increase farm productivity.

2. Develop value-added, high-margin

markets, channels and products.

3. Promote and protect the unique

benefits of Australian dairy.

The organisation prepares an annual

rolling five-year Strategic Plan. The

current plan can be downloaded from

www.dairyaustralia.com.au.

Figure 26

Australian dairy industry organisations

Manufacturing sector Farmer/Agri-political sector

Farmers

Service sector

Group A members

Manufacturing

sector

Australian Dairy

Products

Federation (ADPF)

State farmer

organisations

Australian Dairy

Farmers Ltd

(ADF)

Dairy Australia

Limited

Australian Dairy

Industry Council (ADIC)

Group B members

34

Australian Dairy Industry In Focus 2008


Australian Dairy Industry Council

The Australian Dairy Industry Council

(ADIC) is the dairy industry’s peak policy

body. It co-ordinates industry policy

and represents all sectors of the industry

on national and international issues.

The ADIC represents farmers, dairy

product manufacturers and milk processors

through its constituent organisations:

Australian Dairy Farmers Limited; and

Australian Dairy Products Federation.

The ADIC has the task of bringing these

bodies together to form a united view

on issues affecting the dairy industry.

Australian Dairy Farmers Limited

Australian Dairy Farmers Limited (ADF)

provides national representation for dairy

farmers and forms the dairy commodity

council of the National Farmers’ Federation.

Its members include the six dairy farmer

organisations, representing each state:

• New South Wales Farmers’

Association’s Dairy

Committee (NSWFA);

• Queensland Dairyfarmers’

Organisation (QDO);

• South Australian Dairyfarmers’

Association (SADA);

• Tasmanian Farmers and Graziers

Association’s Dairy Council (TFGA);

• United Dairyfarmers of Victoria

(UDV); and

• Western Australian Farmers’

Federation’s Dairy Council (WAFF).

Australian Dairy

Products Federation

The Australian Dairy Products Federation

(ADPF) is the national organisation

representing the interests of dairy product

manufacturers and traders. The ADPF’s

primary purpose is to promote the

interests of its members, and the dairy

industry in general, to the Australian

and State Governments and other sectors

of the community.

State food safety organisations

Each state has a food safety organisation

to ensure that individual processors

and dairy farmers comply with food

safety standards.

The Australian Dairy Authorities

Standards Committee (ADASC), with

representatives from each state food safety

organisation, ensures there is a national

approach to dairy food safety issues.

ADASC is responsible for the Australian

Milk Residue Analysis (AMRA) survey.

The six relevant state food safety

organisations are:

• Safe Food Queensland;

Dairy Food Safety Victoria;

• New South Wales Food Authority;

Dairy Authority of South Australia;

• Department of Health, Western

Australia Dairy Safety Unit; and

• Tasmanian Dairy Industry Authority.

Australian Dairy Industry In Focus 2008 35


Industry levies

Dairy Services

Dairy Australia is funded by farmerpaid

levies that are imposed on the

fat and protein content of all milk

produced in Australia.

The Australian Government matches

expenditure on the industry’s research

and development activities that meet

established criteria.

All Australian dairy farmers had the

opportunity to participate, by mail, in the

Dairy Poll 2007 conducted during February

and March 2007. Compared to levy polls

in other agricultural industries, a high

participation rate of 53% was achieved.

Some 68% of votes were cast in favour

of maintaining the Dairy Service Levy

at its current rate.

Animal Health Australia

Australian dairy farmers also contribute

to the funding of Animal Health Australia

(AHA), as do farmers in all other livestock

industries. AHA is a non-profit public

company limited by guarantee. Members

include the Australian, state and territory

governments, and key commodity and

interest groups. AHA’s task is to facilitate

partnerships between governments and

livestock industries, and provide a national

approach to animal health systems. The

Animal Health Levy is the dairy industry’s

contribution to AHA programs.

Dairy Adjustment Authority

As part of the Dairy Structural Adjustment

Program (DSAP), the Dairy Adjustment

Levy was imposed on domestic (retail)

sales of products marketed as dairy

beverages from 8 July 2000. The Federal

Government introduced legislation to

abolish the levy in September this year.

It is expected the levy will be removed in

early 2009.

Table 20

Average rate of milk levies for 2008/09

Milkfat Protein Milk * Milksolids

(cents/kg) (cents/kg) (cents/litre) (cents/kg)

Animal Health 0.0373 0.0880 0.004 0.06

Dairy Services 2.6075 6.3558 0.317 4.28

Dairy Adjustment # 11.000

* Based on average 2007/08 Australian milk composition of 4.10% milkfat and 3.31% protein

# Levied on dairy beverages only at retail

36

Australian Dairy Industry In Focus 2008


Appendices

1. Regions 38

2. Milk production 39

3. Manufacturing processes 40

4. Supermarket sales 43

5. Exports 46

6. Imports 51

Index 52

Australian Dairy Industry In Focus 2008 37


Appendix 1 – Regions

Darwin

Northern Territory

Cairns

Queensland

South Australia

Brisbane

Western Australia

New South Wales

Perth

Adelaide

Sydney

A.C.T.

Dairy Farming Areas by

Regional Development Program

Victoria

Melbourne

Canberra

Dairy Industry Development Company (DIDCO)

Dairy SA

Dairy TAS

GippsDairy

Murray Dairy

Hobart

Tasmania

Subtropical Dairy

WestVic Dairy

Western Dairy

38

Australian Dairy Industry In Focus 2008


Appendix 2 – Milk production

Figure A1

Seasonality of milk production (million litres)

2007/08

Average 2002/03 – 2006/07

New South Wales

Victoria

150

1,000

125

800

Million litres

100

75

50

Million litres

600

400

25

200

0

Jul

Aug

Sep

Oct

0

Jul

Aug

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Queensland

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Sep

Oct

South Australia

80

80

60

60

Million litres

40

Million litres

40

20

20

0

Jul

Aug

0

Jul

Aug

Sep

Oct

Nov

Dec

Western Australia

Jan

Feb

Mar

Apr

May

Jun

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Tasmania

50

100

40

80

Million litres

30

20

Million litres

60

40

10

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

20

0

Jul

Aug

0

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Australian Dairy Industry In Focus 2008 39


Appendix 3 – Manufacturing processes

The milkfat and solids contained in

manufacturing milk can be used to

produce a wide variety of dairy products.

There are four major production processes.

The first two are for butter/skim milk

powder production and butter/casein

production, which are joint product

processes. The other two are wholemilk

powder production and cheese production.

Furthermore, for each of these separate

product lines, other dairy products can be

made from the residual milk components.

The first step in making butter is to

separate whole milk into cream and skim

milk. The liquid skim milk is evaporated

and spray dried to produce skim milk

powder (SMP). The cream is churned until

the fat globules form into solid butter,

leaving a liquid by-product, buttermilk.

This liquid can be dried to make

buttermilk powder (BMP).

There are various ways of making casein.

A common method is to set the skim

milk by mixing it with acid to produce

curd. The curd is shaken to remove large

clumps. The remaining liquid whey

by-product is removed and the curd is

repeatedly rinsed in water and drained.

Excess moisture is extracted by pressing

the curd. It is then milled and dried. The

curd is broken down to particle size by

grinding it and passing it through a sieve.

Table A1

Product composition

% fat % SNF

Skim milk powder 1.0 94.5

Butter 80.5 2.0

Ghee 99.6 0.1

Casein 1.5 88.5

Wholemilk powder 26.0 70.4

Cheddar cheese 33.0 31.0

Gouda 31.5 23.5

Edam 21.2 31.8

Parmesan 21.8 46.2

Cottage cheese 4.0 16.0

Brie 25.0 25.0

Mozzarella 23.1 30.9

Wholemilk powder (WMP) is made by

evaporating milk that has had some

of the cream removed. The evaporated

milk is concentrated and dried either

by roller or spray process to form a

powder. Spray drying is more commonly

used and involves spraying a fine mist

of concentrated milk into a current of

hot air to form granules of powder. The

granules can be treated with steam to

‘instantise’ the powder and make it easier

to reconstitute into milk.

Cheese production techniques vary

substantially. To make cheddar cheese,

some of the cream is removed from the

pasteurised milk. Starter culture is added

to the milk to produce both acid and

flavour. Then rennet is added to form

curd and whey. The curd is cut, heated

Figure A2

Product yield from 10,000 litres of milk 2007/08

10,000 litres milk

405kg fat

330kg protein

880kg SNF

Butter/SMP

890kg SMP

488kg butter

49kg BMP

Butter/casein

299kg casein

488kg butter

49kg BMP

WMP

1,270kg WMP

93kg butter

9kg BMP

Cheddar

1,050kg cheddar

24kg butter

2kg BMP

625kg whey pdr

40

Australian Dairy Industry In Focus 2008


and stirred to allow the whey to drain. A

process called cheddaring then takes place.

It involves the curd being allowed to mat

together, before it is milled, salted, pressed

and packed. The cheese is stored to

develop the desired maturity and flavour.

The longer it is stored, the stronger the

flavour. Mild cheddar is matured for about

three months, semi-matured cheddar for

three to six months, and mature or tasty

cheddar for up to a year.

The liquid whey extracted during cheese

manufacture contains protein, lactose and

a little fat. It can be dried to make products

for pharmaceutical purposes, as a useful

supplement in stock feed, and in the

manufacture of ice-cream.

The cream from the standardisation of

milk for wholemilk powder, casein and

cheddar production can be used to make

butter and BMP.

Table A2

Australian cheese production by state (tonnes)

NSW VIC QLD SA WA TAS AUST

1979/80 12,720 91,308 11,054 17,895 2,886 15,328 151,191

1989/90 14,198 103,216 12,842 22,774 4,129 18,172 175,331

1994/95 16,563 151,495 17,010 29,155 5,625 20,509 240,358

1995/96 18,786 171,928 20,251 31,361 5,118 25,031 272,474

1996/97 22,385 179,757 23,464 33,847 4,952 25,589 289,994

1997/98 27,663 195,538 22,620 30,871 6,680 26,995 310,368

1998/99 26,944 207,913 23,721 33,184 5,868 30,143 327,773

1999/00 26,441 239,029 26,011 40,782 7,680 33,399 373,342

2000/01 23,443 257,006 22,672 33,541 7,305 32,510 376,477

2001/02 24,836 285,239 24,618 36,120 8,473 32,776 412,063

2002/03 22,686 259,399 22,569 28,364 8,411 37,538 378,966

2003/04 19,748 268,433 23,520 26,463 8,481 37,117 383,762

2004/05 22,453 270,651 18,447 33,562 7,357 35,880 388,350

2005/06 21,140 268,925 7,308 31,394 6,411 37,638 372,816

2006/07 22,690 266,102 4,542 29,503 2,618 38,183 363,638

2007/08 (p) 24,576 268,178 2,828 16,699 2,268 44,340 358,889

Source: Dairy manufacturers

Table A3

Australian production of dairy products (tonnes)

Butter* AMF (CBE) SMP WMP** Whey Products

1989/90 78,053 26,105 130,976 56,476 19,895

1994/95 88,280 52,872 192,412 104,380 44,939

1995/96 96,260 57,258 207,882 113,035 50,082

1996/97 101,835 56,036 217,845 133,727 53,180

1997/98 103,545 59,417 208,574 128,487 56,087

1998/99 106,537 82,452 248,663 144,839 59,972

1999/00 110,325 71,295 236,322 186,653 66,258

2000/01 103,145 69,175 244,442 205,449 61,452

2001/02 108,308 70,045 239,489 238,684 88,785

2002/03 103,377 60,343 196,608 198,306 99,384

2003/04 104,143 44,754 182,056 186,860 105,390

2004/05 105,131 41,528 189,113 189,220 105,225

2005/06 92,850 52,904 205,495 158,250 98,436

2006/07 101,666 31,434 191,475 135,364 86,198

2007/08 (p) 99,202 28,416 164,315 141,974 82,652

Source: Dairy manufacturers *Includes butter blends as CBE ** Includes infant powders

Australian Dairy Industry In Focus 2008 41


Table A4

Australian cheese production by variety (tonnes)

2002/03 2003/04 2004/05 (r) 2005/06 (r) 2006/07 (r) 2007/08 (p)

Cheddar and cheddar types

Cheddar (1) 181,348 176,120 172,942 159,921 148,845 135,910

Reduced fat cheddar 24,320 27,074 17,368 26,943 22,287 26,754

Cheedam 1,898 1,884 1,085 833 541 28

Other cheddar type cheese (2) 5,245 2,717 4,492 3,996 7,486 8,549

Total Cheddar 212,810 207,795 195,887 191,693 179,159 171,241

Semi-hard cheese

Mozzarella 50,553 54,628 57,186 52,603 54,117 53,981

Pizza 8,412 8,681 5,573 5,581 4,573 4,957

Other stretch curd and shredding 4,726 6,775 9,312 4,807 2,835 1,955

Edam 671 484 267 123 158 709

Gouda 12,059 12,151 11,310 6,450 6,818 8,040

Other eye type cheese (3) 1,740 1,980 3,652 3,607 3,552 2,337

Other semi-hard cheese (4) 5,812 4,013 3,414 3,642 3,476 618

Total semi-hard cheese 83,973 88,712 90,714 76,813 75,529 72,597

Hard grating types

Parmesan 4,942 5,009 5,072 8,462 8,631 9,981

Pecorino 1,386 1,537 840 892 1,536 2,021

Romano 2,108 1,328 2,256 2,854 2,028 1,639

Other (5) 3,681 3,459 5,099 10,814 6,282 3,810

Total 12,118 11,333 13,267 23,022 18,477 17,451

Fresh types

Cottage 3,093 2,806 2,692 2,490 2,488 2,568

Cream cheese 39,731 46,817 57,235 50,022 58,161 62,267

Fetta 4,162 4,576 5,875 5,195 5,668 5,741

Neufchatel 7,155 7,293 7,909 8,681 9,270 9,521

Ricotta 2,818 3,009 4,948 4,402 5,376 5,762

Other fresh types (6) 7,152 6,379 4,990 4,651 3,480 3,786

Total 64,110 70,880 83,649 75,441 84,443 89,645

Mould ripened

Blue Vein 764 836 848 1,062 1,025 1,434

Brie and Camembert 3,151 1,738 1,736 2,247 4,602 6,072

Other mould ripened 2,040 2,468 2,249 2,538 403 449

Total 5,955 5,042 4,833 5,847 6,030 7,955

Total cheese 378,966 383,762 388,350 372,816 363,638 358,889

(1) Includes: Vintage (2) Includes: Colby, Cheshire, Gloucester, Lancashire, Leicester, Nimbin and semi-processed cheddar

(3) Includes: Swiss, Emmenthal, Fontina, Havarti, Samsoe, Tilsit, Buetten, Vacherin (4) Includes: Bakers, Casalinga, Goya

(5) Includes: Fresh Pecorino, Melbourno, Pepato, Parmagiano (6) Includes: Quark, Stracchino, Mascarpone

Revisions due to reclassification of cheeses and revisions of specialty cheese production

Source: Dairy manufacturers

42

Australian Dairy Industry In Focus 2008


Appendix 4 – Supermarket sales

Milk

Table A5

Supermarket milk sales by state (million litres)

NSW VIC QLD SA WA TAS AUST

2005/06 (r) 348 298 260 114 105 26 1,151

2006/07 (r) 352 306 273 115 115 27 1,189

2007/08 361 307 288 114 121 28 1,219

Source: AC Nielsen

Table A6

Supermarket milk sales by type (million litres)

Regular Reduced fat Low fat Flavoured UHT AUST

2005/06 (r) 566 336 73 56 120 1,151

2006/07 (r) 563 361 75 64 125 1,189

2007/08 585 368 73 67 127 1,219

Source: AC Nielsen

Table A7

Supermarket milk sales – branded vs private label

2005/06 (r) 2006/07 (r) 2007/08

Million Price/ Million Price/ Million Price/

Litres Litre Litres Litre Litres Litre

Branded milk

Regular whole 138 $1.53 140 $1.57 145 $1.74

Reduced fat 180 $1.75 187 $1.78 177 $1.99

Low fat 69 $1.81 70 $1.86 68 $2.09

Flavoured 53 $2.88 60 $2.97 63 $3.31

UHT 66 $1.83 77 $1.82 81 $1.96

Total branded milk 506 $1.83 535 $1.88 535 $2.09

Private label

Regular whole 428 $1.11 423 $1.13 439 $1.16

Reduced fat 156 $1.27 174 $1.28 191 $1.34

Low fat 4 $1.59 4 $1.63 4 $1.65

Flavoured 4 $1.88 4 $1.90 4 $1.95

UHT 54 $1.11 49 $1.15 46 $1.18

Total private label milk 646 $1.16 654 $1.18 684 $1.22

Total milk 1,151 $1.45 1,189 $1.49 1,219 $1.60

Source: AC Nielsen

Australian Dairy Industry In Focus 2008 43


Cheese

Table A8

Supermarket cheese sales by type (tonnes)

2005/06 (r) 2006/07 (r) 2007/08

Cheddar

Natural cheddar 67,392 67,822 66,570

Processed cheddar 20,422 19,948 19,037

Total cheddar 87,814 87,770 85,607

Non-cheddar

Eye 3,733 3,619 3,551

Shredding 6,809 7,227 7,658

Hard grating 3,833 4,087 4,152

Fresh 18,757 19,069 18,376

Mould ripened 4,547 4,585 4,700

Other non-cheddar 643 829 824

Total non-cheddar 38,322 39,416 39,261

Total cheese 126,136 127,186 124,868

Source: AC Nielsen

Table A9

Supermarket cheese sales by pack size

2005/06 (r) 2006/07 (r) 2007/08

Tonnes Price/kg Tonnes Price/kg Tonnes Price/kg

250 gram 23,972 $12.82 24,000 $13.29 25,194 $14.66

500 gram 40,219 $8.86 39,921 $9.16 37,481 $10.17

1 kilogram 20,147 $6.81 18,945 $7.22 16,255 $8.17

Other sizes 41,798 $14.39 44,319 $14.88 45,938 $15.88

Total cheese 126,136 $11.12 127,185 $11.65 124,868 $12.92

Source: AC Nielsen

Table A10

Supermarket cheese sales by form

2005/06 (r) 2006/07 (r) 2007/08

Tonnes Price/kg Tonnes Price/kg Tonnes Price/kg

Blocks 54,263 $11.14 54,372 $12.03 51,907 $13.77

Bulk deli 8,708 $14.17 6,966 $13.46 5,365 $14.37

Shredded/grated 21,643 $10.36 22,715 $10.94 23,396 $11.84

Slices 25,482 $9.68 26,317 $10.10 25,933 $11.32

Tubs/jars 12,714 $10.87 13,104 $11.33 12,683 $12.29

Others 3,248 $19.74 3,652 $19.02 4,872 $16.57

Total cheese 126,136 $11.12 127,186 $11.65 124,868 $12.92

Source: AC Nielsen

44

Australian Dairy Industry In Focus 2008


Tablespreads

Table A11

Supermarket tablespreads sales by type

2005/06 (r) 2006/07 (r) 2007/08

Tonnes Price/kg Tonnes Price/kg Tonnes Price/kg

Dairy

Butter 16,627 $5.91 16,599 $6.60 17,436 $7.44

Blends 20,212 $6.15 19,866 $6.73 19,717 $7.32

Ghee 44 $10.06 40 $10.89 36 $12.31

Total dairy spreads 36,883 $6.05 36,505 $6.68 37,189 $7.38

Source: AC Nielsen

Table A12

Supermarket dairy spreads sales by pack size

2005/06 (r) 2006/07 (r) 2007/08

Tonnes Price/kg Tonnes Price/kg Tonnes Price/kg

250 gram 7,781 $5.63 7,540 $6.65 7,578 $7.65

375 gram 6,544 $7.68 6,300 $8.46 6,134 $9.54

500 gram 22,215 $5.65 22,284 $6.10 22,090 $6.63

Other sizes 342 $10.10 380 $11.59 855 $10.61

Total dairy spreads 36,882 $6.05 36,504 $6.68 36,657 $7.38

Source: AC Nielsen

Table A13

Supermarket dairy spreads sales by form

2005/06 (r) 2006/07 (r) 2007/08

Tonnes Price/kg Tonnes Price/kg Tonnes Price/kg

Pats 13,176 $5.10 13,022 $5.72 12,897 $6.48

Tubs 23,494 $6.56 23,253 $7.19 23,531 $7.90

Others 212 $8.23 230 $9.39 230 $10.83

Total dairy spreads 36,882 $6.05 36,505 $6.68 36,658 $7.38

Source: AC Nielsen

Total dairy category

Figure A3

Supermarket dairy category sales – 12 months to December 2007

Infant formula/powdered milk 3%

Dairy dips 3%

Butter and dairy blends 5%

Ice-cream 12%

Chilled cream and custard 4%

Milk – white 27%

Milk – flavoured 4%

Evaporated/condensed milks 1%

Cheese 25%

Yogurt and dairy desserts 16%

Source: AC Neilsen

Australian Dairy Industry In Focus 2008 45


Appendix 5 – Exports

Table A14

Australian exports of cheese (tonnes)

2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 (p)

Asia

China, Hong Kong 4,581 6,728 6,857 8,180 10,123 11,080

Indonesia 4,235 5,223 6,792 6,061 7,678 4,028

Japan 72,606 92,625 106,549 81,047 95,879 96,906

Korea, South 15,876 13,137 10,365 8,936 8,327 6,872

Malaysia 2,381 2,301 3,103 3,476 3,465 3,872

Philippines 4,848 3,693 4,953 3,381 3,316 4,391

Singapore 2,412 2,526 2,445 2,832 3,667 3,826

Taiwan 4,742 6,384 5,844 5,399 5,464 5,842

Thailand 1,098 948 999 1,215 1,587 2,014

Other Asia 1,016 1,161 1,372 1,522 1,144 1,040

Total Asia 113,795 134,726 149,279 122,049 140,650 139,871

Middle East

Saudi Arabia 14,839 14,911 17,081 20,708 18,066 16,355

U.A.E. 2,802 3,209 3,513 4,130 4,057 3,619

Other Middle East 6,542 7,535 9,321 11,499 10,468 8,904

Total Middle East 24,183 25,655 29,915 36,337 32,591 28,878

Africa

Algeria 5,525 4,872 3,179 4,417 2,342 1,460

Egypt 2,661 1,404 1,996 1,921 2,784 2,028

Other Africa 2,714 3,246 2,669 2,865 2,794 2,510

Total Africa 10,900 9,522 7,844 9,203 7,920 5,998

Pacific

New Zealand 1,729 1,714 2,415 2,761 2,665 4,352

Others 750 801 714 765 604 660

Total Pacific 2,479 2,515 3,129 3,526 3,269 5,012

Americas

Caribbean 3,219 1,317 799 940 540 201

United States 8,950 10,261 11,931 11,807 14,044 8,719

Others 4,933 4,536 2,781 2,135 1,820 1,065

Total Americas 17,102 16,114 15,511 14,882 16,404 9,985

Europe

Eastern Europe 220 306 467 139 424 831

EU (27) 37,778 23,095 21,273 15,566 11,056 12,073

Other Europe 67 36 60 0 0 0

Total Europe 38,065 23,437 21,800 15,705 11,480 12,904

46

Total 206,524 211,969 227,478 201,702 212,314 202,648

Source: Dairy Australia and ABS

Australian Dairy Industry In Focus 2008


Table A15

Australian exports of wholemilk powder (tonnes)*

2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 (p)

Asia

Bangladesh 9,605 5,257 6,137 7,344 6,898 2,072

China, Hong Kong 14,987 8,330 3,414 7,146 6,546 13,212

Indonesia 14,738 12,729 13,642 24,676 20,575 15,218

Japan 4,416 2,832 1,307 669 580 204

Malaysia 19,961 28,110 28,708 25,843 20,895 17,838

Philippines 23,709 16,567 15,168 6,985 4,160 4,420

Singapore 13,567 10,187 12,725 17,080 15,259 17,841

Sri Lanka 14,991 11,486 7,200 10,721 6,430 4,341

Taiwan 19,450 17,958 15,341 10,754 5,769 3,962

Thailand 9,659 7,267 6,025 5,784 6,702 5,236

Others 8,695 6,465 4,899 6,038 6,022 5,838

Total Asia 153,778 127,188 114,566 123,040 99,836 90,182

Africa 13,677 12,738 7,732 12,403 10,070 9,504

Americas 5,720 3,451 6,713 13,069 11,111 10,327

Europe 185 1,700 411 26 450 198

Middle East 22,221 21,354 24,232 10,419 18,500 12,151

Pacific 4,778 6,970 6,803 5,879 3,474 2,761

Total 200,359 173,401 160,457 164,836 143,441 125,123

*Also includes infant powder Source: Dairy Australia and ABS

Table A16

Australian exports of skim milk powder (tonnes)

2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 (p)

Asia

China, Hong Kong 10,159 10,688 9,056 7,284 8,754 9,737

Indonesia 12,831 14,972 13,700 17,232 15,394 15,500

Japan 4,134 2,461 3,414 3,914 1,329 610

Malaysia 22,666 22,087 22,018 25,648 24,265 14,223

Philippines 29,656 24,151 17,686 25,407 15,828 13,345

Singapore 17,694 16,968 20,670 20,128 22,961 15,859

Taiwan 10,802 10,072 8,182 10,284 9,580 5,827

Thailand 14,518 7,932 8,250 26,844 17,897 11,642

Others 9,999 12,631 9,872 10,767 10,785 5,848

Total Asia 132,459 121,962 112,848 147,507 126,793 92,590

Africa 7,675 4,847 6,352 3,704 6,023 2,408

Americas 13,322 8,298 4,069 4,067 5,266 1,983

Europe 142 354 98 235 1,111 313

Middle East 12,405 10,401 9,136 19,042 19,878 22,010

Pacific 271 315 725 1,032 1,258 509

Others 0 0 0 17 0 0

Total 166,274 146,178 133,229 175,605 160,329 119,813

Source: Dairy Australia and ABS

Australian Dairy Industry In Focus 2008 47


Table A17

Australian exports of butter* (tonnes)

2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 (p)

Asia

China, Hong Kong 3,634 3,245 2,769 2,251 3,393 3,692

Japan 1,235 2,318 2,172 1,550 2,279 4,388

Korea, South 3,637 5,759 7,708 3,018 4,810 3,955

Malaysia 2,491 1,918 1,474 1,490 1,470 1,640

Singapore 3,607 4,275 5,378 3,256 4,142 4,918

Taiwan 2,858 1,611 1,112 1,321 1,178 1,211

Others 1,395 1,479 1,358 1,518 1,905 1,176

Total Asia 18,857 20,605 21,971 14,404 19,177 20,980

Middle East

Saudi Arabia 2,965 1,275 360 1,256 1,742 1,357

U.A.E. 952 414 275 939 2,494 1,355

Others 3,567 2,982 2,209 1,135 1,489 1,043

Total Middle East 7,484 4,671 2,844 3,330 5,725 3,755

Africa

Mauritius 313 264 256 189 219 227

North Africa 8,786 2,436 2,924 3,926 6,273 1550

Others 921 391 58 140 156 60

Total Africa 10,020 3,091 3,238 4,255 6,648 1,837

Pacific 722 250 591 1,085 998 462

Americas 2,081 2,403 3,331 4,233 1,952 423

Europe 10,365 10,922 5,925 8,219 9,779 7221

Total 49,529 41,942 37,900 35,526 44,279 34,678

* Includes butter blends converted at the rate of 1kg butter blend = 0.7kg butter

Source: Dairy Australia and ABS

48

Australian Dairy Industry In Focus 2008


Table A18

Australian exports of butteroil (tonnes)

2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 (p)

Asia

Bangladesh 1,152 453 403 151 119 85

Indonesia 3,605 818 370 1,975 1,025 571

Malaysia 1,807 2,241 1,557 2,682 2,385 2621

Philippines 1,613 721 755 1,210 885 294

Singapore 2,349 2,227 1,358 3,932 2,181 1623

Others 14,610 9,409 6,835 6,168 7,389 4,734

Total Asia 25,136 15,869 11,278 16,118 13,984 9,928

Middle East

Kuwait 682 1,070 486 137 0 14

U.A.E. 1,809 2,245 2,164 2,060 2,029 1,958

Others 3,952 3,028 897 2,394 1,515 678

Total Middle East 6,443 6,343 3,547 4,591 3,544 2,650

Africa 5,035 1,888 2,018 2,100 1,979 69

Americas 10,390 7,406 6,559 13,240 9,061 4329

Europe 1,022 1,526 1,851 1,518 838 972

Pacific 231 135 194 120 129 176

Total 48,257 33,167 25,447 37,687 29,535 18,124

Source: Dairy Australia and ABS

Table A19

Australian exports of liquid milk (tonnes)

2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 (p)

Asia

Singapore 23,335 18,531 16,689 18,012 18,281 17,277

Philippines 7,006 5,413 7,250 9,600 9,763 5,809

Malaysia 3,774 3,996 3,628 3,650 4,531 3,258

Indonesia 2,033 1,603 1,726 1,386 1,635 1,544

Hong Kong 17,904 14,431 15,839 17,075 17,326 15,600

China 2,094 882 777 694 344 384

Other Asia 6,499 7,484 7,657 6,575 6,823 4,842

Total Asia 62,645 52,341 53,565 56,992 58,701 48,714

Africa 1,713 1,941 3,419 1,059 928 792

Pacific 12,530 12,629 11,888 12,055 9,323 10,307

Others 5 283 1,007 0 238 115

Total 76,893 67,194 69,879 70,107 69,192 59,929

Source: Dairy Australia and ABS

Australian Dairy Industry In Focus 2008 49


Table A20

Australian exports of whey products* (tonnes)

2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 (p)

Asia

Malaysia 2,833 5,237 5,202 5,385 4,281 3,594

Indonesia 6,538 11,558 12,548 12,419 12,486 8,024

Philippines 12,565 14,517 11,678 9,099 5,419 4,883

Japan 11,850 5,443 4,801 1,906 2,251 2,257

China 18,535 17,783 12,396 8,759 8,108 6,630

Hong Kong 681 717 879 975 596 361

Singapore 5,232 4,448 9,087 9,846 7,470 5,279

Taiwan 3,397 2,103 2,244 2,322 1,595 1,117

Thailand 2,626 3,544 5,998 8,824 7,369 5,885

Other Asia 4,131 5,445 6,322 5,128 3,065 3,340

Total Asia 68,388 70,795 71,155 64,663 52,641 41,368

Europe 1,086 83 764 2,404 1,408 467

Other 7,507 10,623 10,309 9,114 9,169 9,100

Total 76,981 81,502 82,229 76,181 63,218 50,935

* Includes whey protein concentrate

Source: Dairy Australia and ABS

Table A21

Australian exports of other milk products* (tonnes)

2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 (p)

Asia

China 721 1,024 3,858 1,157 1,134 7,608

Japan 14,621 7,904 3,068 3,249 4,842 4,132

Indonesia 2,638 1,613 3,626 2,661 3,140 2,194

Malaysia 186 1,717 813 1,006 1,295 1,214

Philippines 6,647 4,445 5,122 7,327 4,206 3,116

Singapore 1,487 5,013 6,365 7,384 3,748 3,566

Thailand 1,729 2,477 1,157 1,371 3,070 1,416

Other Asia 1,245 7,479 3,186 3,253 4,278 5,539

Total Asia 29,274 31,671 27,196 27,409 25,713 28,784

Americas 17,465 18,775 13,661 7,305 7,228 5,285

Europe 1,212 2,108 8,393 4,086 5,345 2,045

Other 4,126 2,208 1,978 2,151 2,701 2,764

Total 52,076 54,762 51,228 40,951 40,988 38,879

* Includes buttermilk powder, casein, milk protein concentrate, lactose and milk powder combinations

Source: Dairy Australia and ABS

50

Australian Dairy Industry In Focus 2008


Appendix 6 – Imports

Table A22

Imports of dairy products from New Zealand and other countries (tonnes)

New Total New Total

Zealand Other 2005/06 Zealand Other 2006/07

Skim milk powder 2,502 622 3,124 3,051 531 3,582

Buttermilk powder 243 2,253 2,496 144 1,915 2,059

Wholemilk powder* 5,836 7,200 13,036 6,648 9,579 16,227

Whey powder and concentrates 2,243 1,713 3,956 2,028 6,414 8,442

Condensed milk 144 1,231 1,375 258 1,825 2,083

Milk 1,196 49 1,245 3,980 14 3,994

Cream 1,060 193 1,253 1,751 7 1,758

Yogurt 706 104 810 563 80 643

Butter** 10,222 612 10,834 15,699 2,246 17,945

Butter oil 1,547 347 1,894 1,914 433 2,347

Mixtures 2,871 3,969 6,840 5,253 4,711 9,964

Cheese 50,529 13,741 64,270 49,230 20,516 69,746

Casein 1,389 79 1,468 1,207 143 1,350

Caseinates 218 17 235 306 16 322

Lactose 2,494 6,377 8,871 1,399 7,977 9,376

Ice-cream (’000 lts) 5,323 12,343 17,666 5,215 10,905 16,120

* Includes infant powder ** Includes butter blends converted at the rate of 1kg butter blend = 0.7kg butter Source: ABS

Table A23

Cheese imports by country (tonnes)

2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 (p)

Austria 28 59 158 202 315 330

Bulgaria 1,162 1,223 1,545 1,615 1,655 1,700

Denmark 1,685 1,904 2,188 2,464 2,163 2,068

France 819 795 692 762 884 933

Germany 490 438 396 356 463 194

Greece 1,133 1,118 1,113 1,146 1,296 1,298

Italy 1,631 2,158 2,059 2,401 2,401 2,803

Netherlands 941 1,087 1,061 1,139 1,291 1,157

Poland 8 89 381 374 463 412

United Kingdom 183 171 193 172 222 153

Other 366 273 256 416 272 589

Total EU 8,446 9,316 10,042 11,047 11,425 11,637

New Zealand 39,948 37,568 37,994 47,195 50,529 49,230

United States 11 11 43 20 51 6,718

Norway 1,577 1,620 1,815 1,817 1,831 1,857

Switzerland 68 72 81 112 104 128

Other 19 104 321 150 330 175

Total Cheese Imports 50,069 48,690 50,296 60,341 64,270 69,745

Source: ABS (Exclude goats cheese)

Australian Dairy Industry In Focus 2008 51


Index

ABARE Farm Survey 15

anhydrous milk fat (AMF) 28

Animal Health Australia 36

attitude of farmers towards the future 5–6

Australian Dairy Authorities Standards

Committee (ADASC) 35

Australian Dairy Farmers Limited 35

Australian Dairy Herd Improvement

Service (ADHIS) 12

Australian dairy industry 2, 9–10

comparison with other agricultural

sectors 9–10

as important rural industry 2, 9

long-term trends 9

situation and outlook 2, 3–8

value of 2, 9

as world competitive industry 10

Australian Dairy Industry Council (ADIC) 35

Australian dairy industry

organisations 33–5

Australian Dairy Products Federation

(ADPF) 35

Australian Export Index 13–14

Australian market situation and outlook 7–8

Australian milk, utilisation 21

Australian Milk Residue Analysis

(AMRA) survey 35

butter 21, 28

consumption 24

exports 28

exports by region 48

manufacture 40, 41

production 28

buttermilk powder (BMP) 21, 40, 41

butteroil

exports 28, 49

production 28

casein/caseinates 21, 32, 40

challenges facing farmers 4, 6

cheddar cheese 27

manufacture 40–1

production 42

cheese 21, 27

consumption 24

domestic sales 27

export sales 27

exports by region 46

imports 27, 51

production by state 41

production by type 27, 42

production techniques 40–1

supermarket sales 27, 44

chilled custards 21, 29

co-operatives 21

cream 29, 41

Dairy 2008: Situation and Outlook 2, 3–8

attitude and challenges 5–6

Australian market situation and

outlook 7–8

confidence in sourcing feed inputs 5

industry in October 2008 3–4

world market demand for dairy 6–7

world supply response to growing

demand 8

Dairy Adjustment Authority 36

Dairy Adjustment Levy 36

Dairy Australia 2, 33–4, 36

dairy blends 28

dairy breeds 12

dairy companies 21, 26

dairy cow numbers, by state 12

dairy desserts 21, 29

dairy dips 29

dairy farm financial performance 15, 16

dairy farming areas 38

dairy farms, number registered 11

dairy manufacturing 21

dairy markets 22–3

by product 22

dairy products

Australian market situation and

outlook 7–8

export returns 14

imports 51

production 41

Dairy Services Levy 33, 36

dairy spreads 28, 45

Dairy Structural Adjustment Program

(DSAP) 36

dairying, location and types 9, 11

domestic consumption 22, 24

domestic market 7, 8

drinking milk 18, 21, 25–6

pack sizes 26

per capita consumption 24

price 26

production 18, 19, 20

sales by state 25

sales by type 25

supermarket sales 26, 43

drought 4, 9, 11, 17

European Union (EU) dairy sector 8, 22

exporters’ share of world dairy trade 23

exports 8, 22–3

butter 28, 48

butteroil 28, 49

by region 23

casein 32

cheese 27, 46

liquid milk 49

milk powders 30, 31, 47, 50

other milk products 50

spot prices 3

whey products 32, 50

factory paid prices 14, 15

farm business equity 15

farm business profit 15

farm cash income 4, 15

farm facts 11–16

farm management practices 18

farm numbers 12

farmgate milk prices 2, 3–4, 12–13, 14

international 10

feed inputs 4

sourcing of 5

flavoured milks 26

fresh products 29

fresh type cheeses, production 42

frozen products 29

hard grating cheeses, production 42

herd size 12

ice-cream 29

imports

cheese 27, 51

dairy products 51

Indian production 8

industry levies 36

industry organisations and structure 33–5

international farmgate milk prices 10

liquid milk, exports 49

manufacturing milk production 18, 19, 20

manufacturing processes 40–2

margarine 28

milk composition by state 19

milk levies 36

milk powders 21, 30–1

exports 30, 31, 47, 50

production 30, 31

milk production 2, 17–20

average annual per cow 13

average annual per farm 12

by region 38

by state 18, 19, 20

seasonality 17, 18, 39

versus indices of farms and cows

milked 17

mould-ripened cheeses, production 42

National Dairy Farmer Survey 3, 4–6

neutriceuticals 21

New Zealand dairy sector 8, 10, 22

per capita consumption of dairy products 24

product yield from 10,000 litres of milk 40

protein/fat composition of milk by state 19

semi-hard cheeses, production 42

skim milk powder (SMP) 21, 40

exports 30, 31, 47

production 30, 31

South American production 8

State food safety organisations 35

supermarket sales

cheese 27, 44

drinking milk 26, 43

growth by dairy category 7

ice-cream 29

tablespreads 45

total dairy category 45

tablespreads 28, 45

UHT milk 21, 26

United States dairy sector 8

whey products 32, 41

exports 32, 50

production 32

whey protein concentrates 21, 32

wholemilk powder (WMP) 21, 40

exports 30, 31, 47

production 30, 31

world market demand for dairy 6–7

world supply response to growing demand 8

yield per cow 12

yogurt 21, 29

consumption 24

52

Australian Dairy Industry In Focus 2008


Australian Dairy Industry In Focus 2008

c


Dairy Australia

ABN 60 105 227 987

Level 5, IBM Centre

60 City Rd

Southbank Victoria 3006 Australia

T + 61 3 9694 3777

F + 61 3 9694 3733

E enquiries@dairyaustralia.com.au

www.dairyaustralia.com.au

Memberline 1800 004 377

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