Dairy and Products Annual

An Expert's View about Food , Beverages and Tobacco in Australia

Posted on: 13 Nov 2011

Post has forecast dairy commodity production and exports to grow at around two percent across the board in CY 2012, in-line with the projected increase in fluid milk production.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 10/14/2011 GAIN Report Number: AS1126 Australia Dairy and Products Annual 2011 Approved By: Joe Carroll, Agricultural Counselor Prepared By: Mike Darby, Agricultural Specialist Report Highlights: Australian dairy production is expected to expand by around two percent in CY 2012, a similar rate to the expansion estimated for CY 2011. Pasture and fodder production increased in CY 2011, and this will likely persist into CY 2012 despite an assumed return to average rainfall. Post has forecast dairy commodity production and exports to grow at around two percent across the board in CY 2012, in-line with the projected increase in fluid milk production. Executive Summary: Australian dairy production is expected to expand by around two percent in CY 2012, a similar rate to the expansion estimated for CY 2011. Above-average rainfall in CY 2010 greatly improved pasture conditions and fodder availability in CY 2011. Steady growth is forecast in CY 2012, despite the expectation that conditions will become generally drier as rainfall continues to decline from record high levels in CY 2010, and back toward the long-term average for CY 2011 and CY 2012. Irrigation water availability has improved to levels experienced prior to the drought (2002-2010). Pasture and fodder production have been boosted in CY 2011 and this will likely persist into CY 2012 despite an expected return to average rainfall. Growth in dairy production in CY 2012 is expected to remain relatively modest at around two percent. A chronic shortage of replacement heifers experienced in CY 2011, following years of drought and herd liquidation, is expected to persist into CY 2012. Historically high grain prices have also partially constrained growth in production in CY 2011 and this is expected to persist into CY 2012. The Australian dollar reached a record high of $US1.10 in CY 2011 and this has somewhat constrained growth in exports. The value of the Australian dollar has eased somewhat (US$1.00) at the time of the writing of this report, and this is expected to provide some relief moving into CY 2012, although Post expects the Australian dollar to remain relatively strong. Sustainable growth in the Australian economy during CY 2011 is expected to continue into CY 2012 and this is likely to support modest growth in domestic consumption. Post forecasts dairy commodity production and exports to grow around two percent across the board in CY 2012, in-line with the projected increase in fluid milk production. Since January 2011, prices received for dairy commodities have generally declined, in part due to a stronger Australian dollar. However, these prices remain ?historically high? and a slightly lower dollar value (at time of writing this report) has provided confidence that exports can be increased modestly in CY 2012. Commodities: Dairy, Milk, Fluid Dairy, Cheese Dairy, Butter Dairy, Dry Whole Milk Powder Dairy, Milk, Nonfat Dry Dairy Cow Numbers Total Cow Numbers Dairy cow numbers are forecast to increase to 1.625 million head in CY 2011, up slightly on the estimated 1.61 million head for CY 2011. This increase follows a long period of herd liquidation caused by the prolonged and severe drought which began in CY 2002 and concluded with record high levels of rainfall in CY 2010. Despite dramatically improved conditions in CY 2010 and CY 2011, dairy herd expansion is expected to continue at a modest rate due to the chronic shortage of replacement dairy cattle following years of drought and associated high slaughter levels. Poor heifer availability has been further exacerbated by live export demand for daily heifers from China. Falling farm numbers, milk price discounting and competition for land and labor from other industries are also expected to continue to slow the growth in total cow numbers for the foreseeable future. Source: ABARES Data Dairy cow numbers have been falling in Australia since 1965, according to historic ABARES figures, as the industry continues to rationalize. The primary reason for falling cow numbers has been a decline in dairy farms and increased cow productivity levels. Over time, the total number of farms has continued to fall dragging total cow numbers lower despite the continued increase in herd sizes of remaining dairy farms. While it is possible for cow numbers to increase sharply, dairy cow numbers are expected to rise modestly going forward. Industry sources urge caution in regards to the potential for sharp increases in cow numbers. ABARES expects improved fodder supply and pasture conditions to see modest consecutive increases in cow numbers out to 2014/15. Fluid Milk Production Fluid milk production for CY 2011 is forecast at to 9.75 MMT, and follows a similar increase in estimated production for the previous year. This increase is expected to be driven by a continued increase in milk yield per cow together with slightly higher cow numbers. Despite the forecast increase in fluid milk production in CY 2012, this level of production remains well below the historical average. The all time record for fluid milk production stands at 11.27 million liters (11.6 MMT), produced in 2001/02 (July-June). Source: ABARES Data Post?s forecast for fluid milk production of 9.75 MMT assumes a record milk yield per cow. Steadily increasing milk yields per cow over the longer term, together with the nearer term, sharp increases in fodder and irrigation water supplies supports the assumption of record high milk yield in CY 2012. Fluid milk production for CY 2011 has been revised downwards slightly to 9.55 MMT, slightly below the 9.6 MMT previously reported by Post. Exports of Fluid milk are forecast to increase only slightly to 75 TMT, less than one percent of total production. This equates to around 72.8 million liters of fresh milk (using a conversion factor of 1.03). A slightly lower Australian dollar value leading into CY 2012 should assist a modest growth in exports in the coming year. According to media reports, Australia is currently trialing the airfreight of fresh milk to China. This purportedly has the potential to add another 15 million liters (or 15.5 TMT) to fresh milk exports per year ? bringing the potential annual total to around 90 TMT over the longer term. Policy ? Pricing Australia?s two largest retailers continue to discount fluid milk sales prices, as outlined in Post?s previous report. The pricing of fresh milk at the retail level continues to be controversial. Coles Supermarkets, Australia?s second largest retailer, recently implemented a new national pricing policy. This policy has effectively discounted retail prices for meat, seafood, dairy, deli and bakery products and has seen milk sold for around AUS$1.00/liter in Coles supermarkets, around half the price of ?branded? milk. This new policy has drawn negative reaction from the Australian dairy industry and has received much media attention. Serious concerns were raised that the pricing strategy is unsustainable and anti-competitive. Dairy, Cheese Cheese production for CY 2012 is forecast at 332 TMT, up around two percent on the revised estimate for the previous year. This increase is roughly in-line with the forecast increase in fluid milk supply. Post?s CY 2012 (Jan-Dec) forecast is largely in line with ABARES forecast of a two percent increase in cheese production for 2011/12 (July-June). Cheese prices are forecast to increase slightly in 2011/12 (July-June) and this also supports post?s forecast. Post notes with interest that cheese prices appear to be the only major dairy commodity to have held firm since January 2011, while butter and milk powders have seen price declines. Estimated production for CY 2011 has been revised to 325 TMT in line with partial-year industry data. For 2011/12 (July-June), industry reports that ?cheddar? varieties remain the most popular and account for just under half of total cheese production while the ?fresh? and ?stretch? varieties account for 24 and 17 percent respectively. Source: ABARES Data Exports of cheese for CY 2012 are also forecast to increase around two percent to 174 TMT in line with forecast increases in production. Imports of cheese from the United States appear to have increased in CY 2011 and are expected to increase again in CY 2012 driven by a stronger Australian dollar and strong demand from the food service sector. According to historic ABARES data, Japan accounts for around 50 percent of the total value of cheese exports and around 53 percent of total volume. Dairy, Butter Total butter production for CY 2012 is forecast to increase around two percent to 107 TMT in line with increased fluid milk supply. Butter prices are expected to ease somewhat in CY 2012, however post expects prices to remain ?historically high? and will not likely significantly constrain production of butter going forward. Estimated production for CY 2011 has been revised downwards slightly to 105 TMT. Partial-year industry data shows a fall in production for the CY 2011 year-to-date although the rate of decline appears to falling on a month-by-month basis leading Post to revise full year production for CY 2011 downwards slightly. Source: ABARES Data Butter exports for CY 2012 are forecast at 65 TMT, up on the revised estimate for the previous year and largely in-line with the forecast increase in production. Historically, butter production has tended to decline over time in line with consumer demand, however butter prices appear to have outperformed other dairy commodities in more recent years leading Post to believe production and exports are likely to grow somewhat in CY 2012. Australia?s export markets for butter remain diverse, with the top export market (Singapore) accounting for only 10 percent of total value and eight percent of total volume of exports. The top five export market account for only 34 percent of total value and only 32 percent of total volume. Dairy, Whole Milk Powder Whole milk powder (WMP) production is expected to increase around two percent in CY 2012 in line with forecast increases in fluid milk production. This forecast increase remains modest when considering the recent large increases in production experienced in previous years. Production for CY 2011 has been revised only slightly to 151 TMT. Monthly data for CY 2011 year- to-date shows production fluctuating widely although showing an increase in production overall. Source: ABARES Data Exports for WMP are also forecast to grow around two percent in CY 2012, in line with increased production. According to historical data, Singapore is Australia?s largest accounts for around 18 percent of export value and around 15 percent of export volume. Dairy, Nonfat, Dry ? Skim Milk Powder Skim milk powder (SMP) production is forecast to increase around two percent in CY 2012 to 235 TMT. Estimated production for CY 2011 remains unchanged at 230 TMT. Source: ABARES Data Exports of SMP in CY 2011 are expected to increase around three percent largely in line with increases in production. According to historical data, the is Australia?s largest SMP export market is the Philippines which accounts for around 14 percent of total export market value while Singapore accounts for around 13 percent. Recent Reports from FAS/Canberra The reports listed below can all be downloaded from the FAS website at: http://www.fas.usda.gov/scriptsw/AttacheRep/default.asp. Title of Report Date Sugar Semi Annual 2011 09/16/11 Livestock and Products Annual 2011 08/31/11 FAIRS Country Report 08/17/11 Stone Fruit Annual 2011 08/11/11 US Cherries Break Through Quarantine Barrier into Western Australia 07/19/11 Agricultural Biotechnology Report 06/29/11 Exporter Guide 06/22/11 Sugar Update 2011 06/20/11 Ag DownUnder June 2011 06/07/11 Dairy Semi Annual 2011 05/09/11 Testing of Food from Japan - Update 04/14/11 Sugar Annual 2011 04/13/11 Production, Supply and Demand Data Statistics Dairy, Milk, Fluid 2010 2011 2012 Market Year Begin: Jan 2010 Market Year Begin: Jan 2011 Market Year Begin: Jan 2012 Australia USDA Official New Post USDA Official New Post USDA Official New Post Cows In Milk 1,553 1,596 1,570 1,610 1,625 Cows Milk Production 9,327 9,327 9,600 9,550 9,750 Other Milk Production 0 0 0 0 0 Total Production 9,327 9,327 9,600 9,550 9,750 Other Imports 11 11 12 12 11 Total Imports 11 11 11 12 11 Total Supply 9,338 9,338 9,612 9,562 9,761 Other Exports 76 71 78 74 75 Total Exports 76 71 78 74 75 Fluid Use Dom. Consum. 2,284 2,284 2,300 2,320 2,350 Factory Use Consum. 6,978 6,983 7,234 7,168 7,336 Feed Use Dom. Consum. 0 0 0 0 0 Total Dom. Consumption 9,262 9,267 9,534 9,488 9,686 Total Distribution 9,338 9,338 9,612 9,562 9,761 1000 HEAD, 1000 MT Dairy, Cheese 2010 2011 2012 Market Year Begin: Jan 2010 Market Year Begin: Jan 2011 Market Year Begin: Jan 2012 Australia USDA Official New Post USDA Official New Post USDA Official New Post Beginning Stocks 19 19 23 23 24 Production 319 319 328 325 332 Other Imports 75 75 75 76 75 Total Imports 75 75 75 76 75 Total Supply 413 413 426 424 431 Other Exports 165 165 170 170 174 Total Exports 165 165 170 170 174 Human Dom. Consumption 225 225 230 230 235 Other Use, Losses 0 0 0 0 0 Total Dom. Consumption 225 225 230 230 235 Total Use 390 390 400 400 409 Ending Stocks 23 23 26 24 22 Total Distribution 413 413 426 424 431 1000 MT Dairy, Butter 2010 2011 2012 Market Year Begin: Jan 2010 Market Year Begin: Jan 2011 Market Year Begin: Jan 2012 Australia USDA Official New Post USDA Official New Post USDA Official New Post Beginning Stocks 6 6 9 9 7 Production 108 108 109 105 107 Other Imports 19 19 18 18 17 Total Imports 19 19 18 18 17 Total Supply 133 133 136 132 131 Other Exports 63 63 63 63 65 Total Exports 63 63 63 63 65 Domestic Consumption 61 61 63 62 63 Total Use 124 124 126 125 128 Ending Stocks 9 9 10 7 3 Total Distribution 133 133 136 132 131 1000 MT Dairy, Dry Whole Milk 2010 2011 2012 Powder Market Year Begin: Jan Market Year Begin: Jan Market Year Begin: Jan Australia 2010 2011 2012 USDA Official New Post USDA Official New Post USDA Official New Post Beginning Stocks 31 31 27 27 23 Production 147 147 155 151 154 Other Imports 15 15 15 16 15 Total Imports 15 15 15 16 15 Total Supply 193 193 197 194 192 Other Exports 137 137 145 141 144 Total Exports 137 137 145 141 144 Human Dom. Consumption 29 29 30 30 31 Other Use, Losses 0 0 0 0 0 Total Dom. Consumption 29 29 30 30 31 Total Use 166 166 175 171 175 Ending Stocks 27 27 22 23 17 Total Distribution 193 193 197 194 192 1000 MT Dairy, Milk, Nonfat Dry 2010 2011 2012 Market Year Begin: Jan 2010 Market Year Begin: Jan 2011 Market Year Begin: Jan 2012 Australia USDA Official New Post USDA Official New Post USDA Official New Post Beginning Stocks 32 32 48 48 56 Production 222 222 230 230 235 Other Imports 5 5 6 5 4 Total Imports 5 5 6 5 4 Total Supply 259 259 284 283 295 Other Exports 160 160 175 175 180 Total Exports 160 160 175 175 180 Human Dom. Consumption 51 51 52 52 53 Other Use, Losses 0 0 0 0 0 Total Dom. Consumption 51 51 52 52 53 Total Use 211 211 227 227 233 Ending Stocks 48 48 57 56 62 Total Distribution 259 259 284 283 295 1000 MT
Posted: 13 November 2011

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