November 2, 2010

Australia's dairy cut turns into NZ's export gain

New Zealand's dairy sector stands to gain in global dairy markets if Australian production falls by a billion litres per annum as has been estimated, said Fed Farmers dairy chairman Lachlan McKenzie.

About 50% of Australia's dairy production is exported and the domestic market is not growing fast enough to take up the slack.

Recently, the Murray-Darling Basin Authority has announced plans to cut water allocations by as much as 4,000 gigalitres - up to 45% on some river systems in the basin, which stretches from Victoria to Queensland which could seriously compromise water hungry agriculture, including the Australian dairy industry.

McKenzie compared the impact on dairy prices to this year's sudden reduction in Russian grain exports due to fire and drought which sent grain prices soaring and also boosted dairy prices, as there was less feed available for stock.

He added the Australia's industry has shrunk over the past decade, while NZ production continues to grow. Australia is grappling with what is likely to be a long-term water shortage. As its population grows, more will be required for urban areas, meaning proportionately less will be available for agriculture, he said.