Australia: The Tight Squeeze On Milk

By Australian Dairy

Australia’s dairy is a major supplier of milk products to the world. Keeping up with international demands, a new research centre and other sustainability initiatives are in the pipeline. Jasmine Lee reports.

Dairy is Australia's third largest rural industry, behind the continent’s beef and wheat industries. Having an estimated farm gate production value of A$4.6 billion (US$4.2 billion) in 2007/08, the dairy industry is a major regional employer, not only in on-farm activities but also in processing, manufacturing and distribution of high quality dairy products such as butter, cream, cheese and yoghurt.

An approximated amount of 40,000 people are currently being employed on dairy farms and in manufacturing plants alone. About 80 percent of dairy production, and especially the manufacturing of longer shelf life products such as cheese, are happening in the states of Victoria, South Australia and Tasmania; the south-eastern corner of the country.

To further bolster the Australian dairy industry, a A$28-million Cooperative Research Centre (CRC) – the Dairy Futures CRC was established, through a partnership between 16 participants from the dairy industry, educational and research sectors.

Dairy Futures Cooperative Research Centre

The Dairy Futures CRC is expected to be the single largest research programme for the dairy industry. Forecasted to deliver benefits worth of A$320 million in value, the Dairy Futures CRC intends to increase the value of pastures and dairy through a wide range of research projects using cutting edge bioscience.

Research projects are developed through consultation with farmers about their needs. Some of the featured projects aim to deliver new grass types that can provide more energy and greater digestibility; improve predictability of genetic merit of cattle using DNA-based information; and assist in reducing the environmental footprints of the dairy industry.

The new Dairy Futures CRC is a major initiative of the Australia’s Department of Primary Industries, and Victoria and La Trobe University will provide state-of-the-art facilities. The centre will be based in Bundoora, Victoria and construction for the new Biosciences Research Centre will commence soon.

As noted by Dairy Australia Managing Director, Dr Mike Ginnivan, “The new facility will allow researchers to have access to the latest bioscience techniques, information and collaboration with other agricultural researchers.”

Efforts In Sustainability

Green initiatives, on the other hand, are already active within the industry, which reported more than A$27 million in environmental sustainability projects over the past three years, according to the Australian Dairy Manufacturing Industry Sustainability Report 2007/08. This report was produced by Dairy Australia on behalf of the Dairy Manufacturers Sustainability Council. It assessed dairy manufacturing’s overall environmental performance at 52 of the nation’s 57 manufacturing sites, and concluded that more than A$2.5 million has been saved as a result of these projects.

But it can be hard to balance between business viability and supporting the pro-green movement. New initiatives such as the Australian Federal Government’s proposal for the Carbon Pollution Reduction Scheme do pose some difficulties to the Australian dairy manufacturers and producers. However Dairy Australia Managing Director, Dr Mike Ginnivan, believed that the industry is well poised to meet these challenges.

“Despite competing for milk supply and for market share in domestic and overseas markets, these companies are sharing their challenges and successes in environment management”, Dr Ginnivan.

PRODUCTION TRENDS: TOUGH TIMES AHEAD

Australian milk production for the 2008/09 season finished at approximately 9.4 billion litres – an increase of 165 million litres or two percent up from last year. The last few months of the season saw slowing milk production in the southern export-focused dairying regions of Australia; due to falls in farm gate milk prices for many dairy farmers.

Early forecast for 2009/10 is expecting a decrease of between two and four percent, a production rate that is approximately the same as 2007/08 where a volume of 9 to 9.2 billion litres was delivered.

With likely fall in the national herd size and climatic uncertainty surrounding the spring rainfall pattern across the southern half of the continent, this may impact pasture growth and water availability for irrigation and may further affect the production forecast.

However with the global financial crisis combining with the volatility of exchange rates and input prices, Australia’s dairy industry faced increased uncertainty and its main concern is whether farm gate prices will be sufficient to meet the cost of producing milk.

Despite the difficult times ahead, not all is lost for the dairy farmers as the world grain harvests are looking strong. Farm gate milk prices for the 2009/10 season opened at levels below that of previous years hence leading to lower feed costs. This allows many farmers in regions like the drought-affected lower Murray-Darling Basin to reassess their situation and make decisions around profitable production levels in the coming season.

Preliminary estimates of manufactured product volumes in the coming year indicate butter / butter oil volumes likely to be up 18 percent and skim milk powder up 29 percent as Australian companies rebalanced their production to take advantage of market prices on offer. Conversely, whole milk powder is likely to be up just four percent; cheese production down six percent and whey products down two percent.