Dairy to be Australia’s ‘new iron ore’?

Posted by AFN Staff Writers on 27th November 2013

Australia’s dairy industry could be poised to ride a “massive wave of demand” for dairy products in Asia that could see dairy product volumes increase by 50 to 60 per cent during the coming decade, according to dairy industry body Dairy Connect NSW Limited (Dairy Connect).

“The outlook for dairy today is very positive,” said Mike Logan, Dairy Connect Chief Executive. “Some analysts believe demand in Asia will be such that dairy products could be described as Australia’s new iron ore,” he said.

Mr Logan said the Whole Milk Powder price on the Global Dairy Trade had taken “a step up by about US$1,500 a tonne”.

“The industry wants to grow; opportunities for growth are looming and investment funds are available to finance that growth,” Mr Logan said. “Right now, the industry needs to move beyond the ‘$1 a litre’ supermarket milk war and, while maintaining the domestic dairy market, must look to Asia for its future,” he said.

Frozen fresh milk a “great opportunity”

Mr Logan said the greatest fresh milk opportunity was the potential to export frozen milk in point-of-sale retail packaging to Asia.

“New technology for rapidly freezing milk is becoming available and the product can be shipped at minus 18 degrees Centigrade,” Mr Logan said. “NSW has the cheapest shipping rates to China based on low cost back-trading,” he said.

Mr Logan said the product defrosts without separating and its use-by-date would begin on defrosting, allowing a 14-day shelf-life.

“The market is nearly unlimited,” Mr Logan said. “It could be bigger than the current NSW production capacity,” he said.

While the industry had not officially quantified the possible growth volumes during the coming decades, Mr Logan said his “gut feeling” was that the fresh milk market “could grow by 10 per cent”.

“If we’re talking frozen milk shipped out in refrigerated containers in retail packaging, growth could be 30 to 40 per cent and manufactured dairy products could grow by as much as 50 to 60 per cent,” Mr Logan said. “One impediment to growth will be negotiating export supply contracts with the processors who control the industry today,” he said.

UK dairy expert says global dairy is flourishing

Dairy Connect facilitated an industry roundtable in Sydney in November 2013 with retiring Director-General of Dairy UK Jim Begg.

“After 43 years watching the dairy industry around the world, Jim Begg’s messages to Australian producers were loud and clear,” Mr Logan said. “The whole global dairy industry is flourishing. The market supply will be constrained. International analysts say supply growth is 2.2 per cent per annum. Demand growth is 2.4 per cent per annum,” he said.

Dairy Connect said Mr Begg’s main message was that the winner in the dairy sector would be “the guy who controls the milk supply”.

Dairy Connect wants to play ‘Quality Assurance gateway’ role

Mr Logan said fresh milk from NSW could be air-freighted to Asia, but that limitations could include “testing protocols, ‘protectionist’ inclinations and air-freight capacity’”. He said Dairy Connect saw itself as developing a “critical role as a Quality Assurance gateway”.

“We want to provide the buyer with paddock-to-plate assurance of the quality and care of our product,” Mr Logan said. “Transparency from the farm, through the factory, the testing data, shipping details and in-country handling is paramount. This is our biggest risk, as evidenced by the Fonterra experience in New Zealand this year. It is also, as an organised western economy, our biggest advantage,” he said.

Dairy Connect is a not-for-profit organisation formed in 2011 to represent the New South Wales dairy industry, including dairy producers, milk vendors, processors, manufacturers and industry stakeholders. Mike Logan is a farm industry veteran who, until recently, served for six years as Chair of the Cotton Research and Development Corporation while farming in the Narrabri region in North Western NSW.