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Australian dairy export future may not be so rosy: Analyst

By Ankush Chibber , 02-Sep-2011

A new report raises serious doubts about the future prospects of Australia’s dairy exports, citing various reasons why the country's production levels will not be able to keep pace with demand for dairy.

The prediction was made in specialist food and agribusiness bank Rabobank's report, Australian Dairy - Stimulating the appetite for growth, which said that said national dairy production levels could not match the global demand for dairy.

Report author and Rabobank senior analyst Michael Harvey said that the global demand for dairy would grow at a rate of two per cent a year, but the Australian pool has dropped well below record levels.

According to the report, Australian milk production was estimated at 9.1bn litres in 2010-11 resulting in a milk pool substantially below the record 11.3bn litres in 2000-01.

“Production disruptions [floods, droughts] have impacted the sector over the past decade. Also a slow rebuild because farmers are more heavily geared and less inclined for capital investment,” he said.

Harvey added that he expects production levels in the country to see a two per cent growth in 2011-12, creating the availability for some additional milk for export markets.

“Two per cent is achievable on a consistent basis but not guaranteed. The key point is the domestic market will grow at around 1.5 per cent in the period and so milk production has to outpace this rate of growth if more milk is to be available for exports,” he said.

Harvey pointed out that the Australian farmer is one of the most crucial factors in how the Australian dairy sector would play out over the next five years or so.

“Confidence and appetite for capital investment are critical factors for the primary producer in the outlook. Right now these factors are positive but excessive. For example, farmers are cautious,” he said.

Harvey added that the dairy sector would have to overcome some serious challenges if it is to have any chance of maintaining a positive outlook over the next few years at least.

“The key challenges are access to labour, access to cows or heifers to quickly grow herds, a strong currency and obviously dealing with weather disruptions,” he said.

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