Australian dairy industry looks to China amid falling domestic prices

The Australian dairy industry is increasing its exports to China and Southeast Asia, where the demand for milk and other dairy products is growing, according to a report by IBISWorld. In recent years in China, there has been an increase in the consumption of dairy products, particularly milk and whey powders that are used in infant formulas and baked goods. With quarantine delays decreasing, the Chinese fresh milk market has opened up for Australian producers, who have increased their exports to meet the growing demand, according to the report.  Murray Goulburn Co-operative Co Limited is the largest Australian owned dairy cooperative, and accounts for a sizeable proportion of national milk output. In May 2014, the company announced US$17.7 million of investment in its baby formula factory in response to growing Asian demand, according to IBISWorld. IBISWorld said that the opening up of the Chinese market delivers a possible revenue source that will be of great benefit to the industry, especially as domestic price growth is likely to be constrained as long as the supermarket milk war continues. A duopoly among Australia’s leading supermarkets kicked off the milk price war by selling generic-brand milk for under US$1.00 per litre, IBISWorld reported. According to IBISWorld, increases in farm-gate prices to sustainable levels will reduce farmers’ cost pressures and allow them to reinvest in their operations. The Chinese currently pay a premium for Australian wine and beef, and there is now potential that fresh milk will be added to the list.