Australians drink more milk than most other countries in the world, but its domestic market has taken a blow from recent inflationary pressures and cost-of-living woes.
However, while the country is among the highest milk consumers in the world, it also exports a substantial amount to other countries, with the export market showing no signs of slowing down.
Food and agribusiness bank Rabobank on Monday cited an industry report that showed Australia’s consumption of milk was trending downwards, with dietary changes posing a challenge to the industry.
Dairy Australia figures indicate domestic milk consumption peaked in 2012 and 2013 at 106.7 litres per person but has since fallen by 13 per cent.
However, the start of 2023 has seen the dairy sector experience an increase in consumer prices across all dairy products, with milk taking the lead.
Rabobank senior dairy analyst Michael Harvey said as demand dipped, an “extended period” of industry-related disruptions and low margins was coming to an end.
“For dairy farmers, higher consumer prices for milk and dairy products across supermarket aisles is welcome news,” Mr Harvey said.
“It will solidify the end of frustrations over the discounting of drinking milk. Additionally, it will ensure higher and more stable returns for the market and mitigate the potential volatility in returns in other channels — both onshore and offshore — for those with access to the drinking milk market.”
But Australia isn’t the only western country to follow the same downward spiral.
“This is not a story unique to Australia,” Mr Harvey said.
“In many westernised economies, consumption of drinking milk shows a similar trajectory,” he said.
Rabobank said while the long-term dynamics of drinking milk in Australia would be hard to reverse, the dairy industry was still being propped up by Australians simply consuming dairy in other forms.
“While fluid milk consumption is declining, other categories such as cheese continue to grow,” Mr Harvey said.
Meanwhile, milk exports have been rising for over ten years, with shipments to China and Southeast Asia underpinning this growth.
“There has been broad-based growth across Southeast Asia, but Singapore, the Philippines and Malaysia have been stand-out performers for Australian dairy exporters in the region,” Mr Harvey said.
Over the 2021-2022 period, Australia exported more than 380 million litres of packaged milk to offshore markets — an increase of 17 per cent over 10 years.
The Rabobank report emphasised that the key to long-term success in the milk market would be Australian dairy producers growing their export volumes despite limited growth in Australian milk production.