Chapter 2.3
Dairy industry
2.60 The Australian Dairy Industry is considered to be a classic example
of a regulated industry that was forced to change so as to cope with a
new environment and found the benefits of making the change far exceeded
“the pain” resulting. [67]
The changes that involved the gradual removal of export subsidies and
import restrictions were forced on the dairy industry in order to adapt
to a much more competitive environment in Australia and overseas. Mr Peter
Gallagher, Chief Executive Officer of the Australian Dairy Industry Council,
argued that:
The thing that made the biggest difference to the dairy industry was
the realisation from the late 1970's, not only in the industry but in
government, that the dairy industry was going to continue to shrink
and go out backwards, probably in favour of New Zealand, unless it became
competitive on world markets. [68]
2.61 In evidence to the inquiry United Milk Tasmania (UMT) noted
that the New Zealand Dairy Board has a total monopoly on all dairy exports out of that
country. In Australia the situation is quite different. Mr Curran, Marketing Manager with
UMT, stated:
In some instances some exports go through the Australian Dairy Corporation
but essentially individual organisations have to stand on their own
two feet and do their own exporting. So with regard to the power that
they have, even the largest companies, the largest Victorian dairy cooperatives,
have much greater power than we have but they have nothing in comparison
with the New Zealand Dairy Board. [69]
2.62 The submission to the inquiry from the Australian Dairy
Industry Council detailed the dramatic changes that have taken place in the industry since
1974 as it struggled to become internationally competitive. Among the main results of the
restructuring have been:
- half Australia's dairy farmers left the industry;
- dairy farmers decreased from 30 600 in 1974 to just over 14 000 in
1993-94;
- cow numbers fell from 2 294 000 to a predicted 1 763 000 in 1995-96;
- despite the fall in cow number wholemilk production rose by 24 per
cent between 1974 and 1994;
- factories processing dairy products were cut from 388 in 1974 to 210
in 1994; and
- despite the fall in the number of people involved in the industry
the turnover out put per worker increased in nominal term from $42 000
to $321 000 between 1974 and 1994. [70]
2.63 Australian milk production was forecast to increase by 5 per cent
to reach 8.6 million litres in 1995-96 which follows a 1.6 per cent increase
in 1994-95. The forecast rise reflected an expected increase in cow numbers
to 1.86 million in 1995-96. Australian milk production is projected to
increase by 28 per cent to around 10.9 million litres between 1995-96
and 2001-01. [71]By 1994-95 the gross
value of dairy production had increased by about 40 per cent in real terms
compared with the average value for the five year period 1975-76 to 1979-80.
According to the Australian Bureau of Agricultural and Resource Economics
milk production has returned to pre-1973 levels despite a 32 per cent
reduction in the dairy herd since that time. [72]
2.64 Most of the milk produced in Australia is used in manufacturing
with the rest consumed as market milk. [73]
Manufactured milk is used in the production of products such as UHT milk,
butter, ice cream, yogurt and cheese. Market milk is milk sold in cartons
and bottles to consumers through shops or home delivery.
2.65 According to business writer Florence Chong, the dairy industry
is adding about $3 billion of value to milk production and has become
one of the largest food processing sectors in Australia. [74]
Mr Gallagher told the Committee in April 1995 that the dairy industry
was worth about $5.5 billion at the retail level and is by “by some
distance, Australia's biggest processed food exporter”. [75]
2.66 United Milk Tasmania, Tasmaid, Cadburys, Lactos and King Island
Dairies have collectively invested more than $45 million in plant and
development over the past five years. [76]
2.67 In his evidence to the inquiry Mr Gallagher discussed several dairy
value-added products that have been recently developed for both the domestic
and export markets. For example, the company Lactos in Tasmania has developed
a range of cheese products that are more suited to the tastes of Japanese
consumers than the French brie and camembert cheeses now consumed in Japan.
[77]
2.68 The Committee was impressed by United Milk Tasmania's approach
to exporting. UMT told the inquiry that it produces products to meet requirements of
particular markets. Mr Curran of UMT, advised that:
Rather than just export to a country, we go out and identify specific
customers who have the need for our sorts of products and we actually
export to those customers. We consider those customers as our market.
We talk to those customers, we find out what sort of slight differentiation
they want for their products that we can do, and that is how we then
supply them. [78]
Footnotes
[67] DPIE, International Agribusiness
Trends and Their Implications for Australia, a discussion paper prepared for the
Primary and Allied Industries Council, Canberra, 1989, p. 44.
[68] Evidence, Australian Dairy
Industry Council, p. 123.
[69] Evidence, UMT, p. 854.
[70] Evidence, Australian Dairy
Industry Council, pp. 108-109 and J. Bills and others Outlook for the Australian Dairy
Industry , Outlook 95, Vol. 2, Agriculture: paper delivered at the Outlook 95
Conference held in Canberra 7-9 February 1995, organised by ABARE p. 136.
[71] T. Gleeson and others, Outlook for
the Dairy Industry, Outlook 96, Vol. 2, Agriculture: collection of papers delivered at
the Outlook 96 Conference held in Canberra 6-8 February 1996, organised by ABARE, pp. 255,
255-256; see also Evidence, Australian Dairy Industry Council, p.106; see also J.
Bills and others, Outlook for the Australian Dairy Industry, Outlook 94, Vol. 3,
Agriculture: collection of papers delivered at the Outlook 94 Conference held in Canberra
1-3 February 1994, organised by ABARE, p. 239.
[72] T. Gleeson and others, Outlook for
the Dairy Industry, Outlook 96, Vol. 2, Agriculture: collection of papers delivered at
the Outlook 96 Conference held in Canberra 6-8 February 1996, organised by ABARE, p.253.
[73] J. Bills and others, Outlook for
the Australian Dairy Industry, Outlook 94, Vol. 3, Agriculture: collection of papers
delivered at the Outlook 94 Conference held in Canberra 1-3 February 1994, organised by
ABARE, p. 232.
[74] Florence Chong, Trading Policies:
Trading Costs of Value-adding, the Australian newspaper, 16 June 1993, p. 29.
[75] Evidence, Australian Dairy
Industry Council, p.114.
[76] Ralph Stuart, A Tasmanian
Approach-from Atlantic Salmon to Green Tea, Outlook 94, Vol. 3, Agriculture:
collection of papers delivered at the Outlook 94 Conference held in Canberra 1-3 February
1994, organised by ABARE, p. 71. UMT gave evidence to the inquiry on 4 September 1995, see
Evidence, UMT, pp. 848-876.
[77] Evidence, Australian Dairy
Industry Council, p.127.
[78] Evidence, UMT, p.853. For
information on products produced by UMT see Evidence, UMT, pp. 857-859.