The liquid ‘drinking’ milk market continues to be crucial for Australia’s dairy industry due to increased domestic retail pricing and potential for additional export development, according to a recently released industry report from Rabobank.
The specialist agribusiness bank claims in the report that the liquid milk category, which in recent years had struggled with a number of issues including retailer discounting, is a significant “pillar” for Australia’s dairy industry, accounting for 30 per cent of milk production and generating more than $4 billion in revenue each year.
The paper states that this is crucial for both income generation and the strategic efficiency of the supply chain, supporting the Australian “dairy value chain and lead to stable farmgate milk prices over multiple seasons for milk suppliers servicing the drinking milk market.”
“Drinking milk, being a staple product in the consumer basket, will remain a large and important category for Australian milk utilisation,” the Rabobank report says.
Findings also showed that the domestic drinking milk market in Australia, meanwhile, is “very mature,” and domestic consumption is declining.
However, rising exports of liquid milk are balancing this out, according to the report’s author, senior dairy expert at Rabobank Michael Harvey.
“As we begin 2023, the market is experiencing a structural increase in consumer prices across the dairy aisle, led by drinking milk in particular,” Harvey noted.
The report showed that dairy processors have passed through record-high farmgate milk prices and higher supply chain costs, as well as tight supply due to declining Australian milk production.
Meanwhile, the Rabobank analysis also found that Australians are big consumers of drinking milk with Australia’s per capita consumption ranking among the highest in the world.
“The average Australian consumes a large volume of drinking milk, ranking only behind Ireland, Finland and New Zealand according to the International Dairy Federation,” Harvey said.
“In 2021/22, Australian per capita consumption of milk stood at 93 litres per person for the year, which equals just over 250 millilitres per day,” the dairy expert added.
In the export industry, the report noted that export volumes of Australian liquid/drinking milk have also been growing, with the total volume exported increasing by more than 200 million litres annually over the past decade.
Looking forward, Harvey said, there is still plenty of “runway” left for export volumes in these markets, supported by positive “demand and trade settings” in their economies.
These included rising consumer demand for sustainable nutrition, capacity constraints in the local dairy industry, the affordability of imported milk, and consumer preferences for foreign brands.
