Continued Consumer Demand for Fresh Milk with Declining Milk Production

The January 2023 Dairy Australia milk production report continues to show both national and state decline in milk production.

National figures for January 2023 showed a 3.6% decrease on January 2022, with national year-to-date being down 6.6%.

The two largest fresh milk producing states also showed a decline in year-to-date figures, with Queensland production being -8.5%, while NSW is -11.8%.

Thus processors will need to ensure their continued supply of fresh milk for the coming year and beyond. This should therefore auger well when dairy farmers negotiate their milk supply agreements with their processor.

Rabobank's latest report 'Australia's Drinking Milk Markets: from Loss Leader to Improving Performer' indicates that the "liquid 'drinking' milk market remains of key importance to Australia's dairy sector - with improved domestic retail pricing and opportunities for further export growth".

This is based upon stronger and higher prices for fresh milk and other dairy produce in Australian supermarkets.

While Australians continue to consume fresh milk in high quantities compared to other nations, there has still been a reduction in the amount of milk being drunk over the past years. Dairy Australia figures have indicated that domestic milk consumption has fallen by 13% since 2012/2013 when Australians drank 106.7 L per person.

Total Australian fresh milk consumption contracted by 1.1% (about 36 M/L) in 2020/2021.

Rabobank dairy analyst, Michael Harvey, has indicated that this is not unique to Australia as many westernised economies have shown a similar trajectory to that of Australian milk consumption.

Rabobank's report indicates that "it's not all bad news for domestic dairy consumption, with consumers simply consuming dairy in different forms".

The report also goes on to state that there are also growth opportunities for exports of liquid milk, especially in the 'Greater China' markets. Total volumes of fresh milk in these markets have expanded by an average of 25% each year over the past decades.

Dairy farmers should enter their milk supply agreement negotiations in the positive knowledge that the need for nutritious fresh milk is in continued demand for both the domestic and export markets.

This, in conjunction with the safeguards afforded by the Dairy Mandatory Code, should enable dairy farmers to seek a strong and fair farmgate price for fresh milk.

Shaughn Morgan, Co-CEO eastAUSmilk