Explore how the Australian Dairy Industry is striving for global competitiveness to counter high milk costs and sustainability challenges. Will they succeed?
Today, the Australian Dairy Products Federation has voiced its concern over the escalating challenges plaguing the dairy industry. As we stand on the precipice of the Fiscal Year 2025 (FY2025), the Federation cautions that the rising costs linked to raw milk production might reach unsustainable levels without significant shifts in the current market trends.
A Disconnect in Prices
The ADPF Chief Executive Officer Janine Waller draws attention to the pressing need for transparent discourse about farmgate milk prices, especially as June 1 is fast approaching. Nonetheless, she underlines the significance of comprehending the array of factors that can influence raw milk prices, not to mention the rapidly shifting domestic and global market landscapes. “The viability of the Australian dairy industry is contingent on its ability to stay globally competitive throughout the entire supply chain,” Waller points out.
Global Market Exposure
It’s crucial to note that a substantial slice, amounting to 71% or in excess of 6 billion litres, of Australia’s output of milk is directly exposed to the fluctuations of global commodity markets and exchange rates. This circumstance mandates that our dairy products must grapple with two fronts of competition – combating imports on the home front and vying with exports on the global stage.
Despite this, Waller observes a persisting disconnect within our borders – a stark discrepancy between global commodity prices and the prices at the farmgate for milk. This disparity casts a long shadow of uncertainty and instability over the future of the Australian dairy industry.”
Market Indicators Painting a Grim Picture
The current state of crucial market indicators is alarming. The Spot Commodity Milk Value (CMV), considered as a significant predictor of future milk prices, currently hovers around $7.30 for every kilogram of milk solids. Comparatively, this is around 30% or $2.00 less than the current weighted average farmgate milk price of $9.40 found in the Southern regions of Australia.
Waller, the CEO of ADPF, paints a worrying picture regarding this situation. “We are paying a price for raw milk that surpasses the value that can be derived from the manufactured dairy product. It’s a stark reality that’s not just concerning, but is ultimately unsustainable in the long term.” There’s a need for an urgent reassessment of strategies to ensure that the bottom line of this prized Australian industry is not compromised.
A Dwindling Dairy Sector?
According to Janine Waller, the CEO of the Australian Dairy Products Federation (ADPF), the dairy industry has been losing significant ground over the last year and a half. As Waller notes, it’s a stark truth that 11 dairy processors have publicly declared that they are closing their doors.
This comes as a shattering blow for an industry steeped in tradition and integral to defining the country’s agricultural landscape. The challenges are mounting for the local dairy industry, presenting a formidable barrier to staying solvent and profitable.
Now, the industry is facing the pressing necessity of evolving. To stay relevant and competitive, it needs to look beyond the local and enter the global stage. This pivot might seem daunting, but it holds potential for revitalizing the Australian dairy sector.
Even in the midst of peril, dairy processors are answering the call to the task. They are committing to remain open, safeguard their employees’ livelihoods, and continually support the hardworking farmers who are the backbone of this industry. They are also standing by their commitment to the regional communities they serve, contributing economically and socially to build better futures.
The ultimate goal they are striving for is ambitious yet so very essential — to galvanize the dairy industry, making it resilient, dynamic, and globally competitive. But it must retain its core Australian essence. They will work tirelessly to ensure dairy manufacturing remains a stronghold of the local market.
