The Australian dairy industry is going gangbusters thanks to Asian demand

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Australia’s dairy farmers are in a good mood with the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) annual conference, Outlook 2015, predicting growth in milk production and farm gate prices in the year ahead.

The optimistic outlook follows strong demand in Asian markets coupled with strong investment from China.

Rabobank’s recently released report into dairy industry investment, “Magnetic Milk”, says overseas investors have been clambering to secure access to liquid milk and infant formula.

Report co-author, Rabobank senior dairy analyst Michael Harvey says a quest to secure access to a high-quality, safe milk pool is driving international investment.

“Between 2014 and 2020 we expect China and South East Asia combined to account for almost one third of the increase in global dairy imports,” he said.

With demand growth in Asia expected to outstrip local supply growth, many Australian exporters are positioning themselves towards Asia and production needs to increase, the report says.

“Import volume growth is expected to expand, but the rate of growth will be slower over the medium-term as the dairy market matures and retail price points challenge consumers who are facing lower rates of income growth,” Michael Harvey said.

Meanwhile, at the ABARES Outlook 2015 conference in Canberra today, commodities manager, Peter Collins, said Australian farmgate and world dairy prices are forecast to rise in 2015–16.

“Australian milk production and the volume of dairy product exports are also expected to increase over the period to 2019–20, with the medium term seeing growing demand for dairy products in Asia, the Middle East and North Africa,” he said.

The Australian farmgate price of milk is forecast to increase 2 cents to 46 cents a litre in 2015–16, while exports will rise $200 million to $2.4 billion in the year ahead, with production also up 200 million litres to 9.6 billion litres.

Over the medium term, Australian milk production is projected to increase to 10.1 billion litres.

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