Australian dairy exports look set to increase by nearly eight per cent this year, but a major challenge for the industry lies in maintaining international and domestic competitiveness says IBISWorld.
According to the market researcher's new report, Milking the export markets: Expanding overseas markets drive export growth, butter and dairy products exports are expected to increase by 7.9 per cent in 2013-14 to reach $575.2 million, driven by the forecast depreciation of the Australian dollar and an increase in global demand for dairy products.
“Over 2013-14, the industry is expected to be strengthened by growing Asian and Middle Eastern economies, which are expected to continue increasing demand for dairy produce from the international market,” IBISWorld wrote.
In the five years leading up to 2013-14, in contrast, exports of butter and other dairy products decreased by an annualised 3.5 per cent, according to IBISWorld, due to weak global conditions, a high Australian dollar and drought.
IBISWorld is estimating that the value of exports for five years to 2018-19 will rise by at a compound annual rate of 2.8 per cent. However, it said future export market challenges included greater production from emerging dairy producing nations, and increasing competition from New Zealand.
“Competition in the international market is expected to increase due to greater production from up-and-coming dairy producing nations, such as India, Brazil and Argentina,” the market researcher said.
“It is also expected that Australia will face increasing competition on the world market from New Zealand, as New Zealand increases production and exports in response to higher prices and demand from the United States.”
On the other hand, some key export markets – particularly Russia and the Middle East – will require increases in dairy imports to meet demand, according to IBISWorld.
Although the market is mature domestically, the researcher says there are still opportunities for companies to exploit niche markets in Australia by applying technology in designing value-added products.
“Domestic producers are likely to shift their product mix away from butter and skim milk powder to cheese and whole milk powder, reflecting the lower expected returns for dairy products. As demand for yoghurt increases, major players will likely aim to take advantage of Australia’s reputation for high-quality dairy products and further develop their export markets,” IBISWorld said.
“Health, nutritional and dietary concerns play an important role in influencing downstream consumer demand for industry products.”
