March 1, 2011

 

Australian dairy demand strong for medium term

 

 

Australia's dairy producers will welcome continuing strong demand and firm prices for their products in 2011-12.

 

Rising incomes in China, the Russian Federation, the Middle East and Asia mean a greater appetite for dairy foods, according to the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES).

 

"Increases in world export supplies are expected to outpace the growth in import demand," writes David Barrett, ABARES dairy analyst.

 

But at the Outlook Conference March 2011, ABARES is reporting that trend will fall within five years.

 

The indication is production will increase, and outgrow the improving demand.

 

In the meantime, the world dairy prices are predicted "to average around 30-40% higher in real terms compared with the five years to 2006-07."

 

Anyone feeding their cows will know how high feed grain prices hurt the profit margin, but that pain will be felt globally.

 

Adding to that factor is increasing milk and cheese production in Western Europe and the UK.

 

"Chinese imports of whole milk powder have increased significantly since 2009, and are forecast to reach around 400,000 tonnes in 2011, around 25% of global trade," says David Barrett.

 

Confidence in China's milk safety record has still not recovered from the melamine contamination scare in 2008, where the toxic compound was present in infant formula milk but went unreported, affecting upwards of 50,000 children.

 

The demand is also being driven by higher incomes and increasing share of dairy in the diet.