Drying-off for the spring calving cows is now fast approaching.
After being fully opened to market forces, the industry has responded in a way that economists would have suggested structural adjustment would occur.
The ‘Changing milk utilisation’ chart clearly shows the impacts of these developments in how milk is used across the states over the past decade.
Looking firstly at the Australian picture, one can see how the combination of a steadily growing domestic market - in both population numbers and per capita consumption terms - and drought-affected total milk production volumes have significantly reduced the proportion of milk available for the export sector.
This is down from around 60% in 2000 to 45% in 2010. Hence drinking milk and manufactured product for the domestic market has now become much more important.
In Queensland, – now very much a “drinking milk” state – the industry has adjusted to become one which basically supplies fresh product as drinking milk to the local market.
The productive capacity to provide manufactured product and export product has moved to those regions with the lowest milk production costs – most notably Victoria. The same trend has also occurred in both Western Australia and New South Wales, but to a lesser extent at this point in time.
One can see this trend continuing in the west, although perhaps not quite to the extent as seen in Queensland – due to the logistics challenges of alternative supply at those times of the year when it can be particularly difficult to balance supply to market demand.
The situation in New South Wales is one of a very diverse state. The northern and central regions are focussed on supplying fresh product to the domestic market. Meanwhile, its southern regions are more closely aligned with the southern “export” states.
In South Australia, the domestic market has become relatively more important to milk produced in that state; while the use of milk in producing manufactured product in Victoria has lifted significantly with the steady concentration of productive capacity in that state over the last decade.
Nevertheless, the absolute volume of milk produced in Victoria – at nearly two-thirds of Australia’s total milk production – together with the significant distances, and therefore costs, in providing fresh dairy products to the urban centres in the other states, means that Victoria remains very much involved in supplying the export sector.
Tasmania is the only state where the mix of milk utilisation has remained virtually unchanged over the past decade. The combination of a small domestic population and generally very conducive climatic conditions for dairying; means Tasmania also remains an “export” state.
Peter Wilson is Dairy
Australia’s Industry Analyst.