Has Australian Dairy been impacted by the trade war?

Team Veye | 01-Jul-2019 Australian Dairy

In the aftermath of the melamine milk scandal in 2008, China’s global imports of dairy products soared, especially after FTAs had been established with Australia and New Zealand. The dairy products of the two countries have had a unique competitive trading advantage in the Chinese market.

Few farm export industries have reaped as much value from the past decade of booming Chinese food trade with Australia as our dairy sector. China, now our biggest offshore dairy market, is worth close to $1 billion a year to farmers and processors, or 30 per cent of our total dairy export earnings.

While unease about an all-out “east-west” cold trade war is undermining some exporter confidence in Australia’s strong trade ties with China, it should be noted that our total share of China’s dairy market was barely 5pc. Europe, New Zealand were big suppliers, and potentially more vulnerable to trade tensions.

We still export to a diverse spread of more than 100 markets around the world, and dairy is very much central to the changing diet and protein demand picture in other parts of Asia, and the Middle East. South East Asia has a lot of developing income and economic growth happening and we see these markets bolstering dairy demand significantly. 

US dairy exports to China were worth about $800 million last year, making it America’s third biggest market. US exports now have been subjected to tariffs of 20pc-plus imposed by Beijing in response to tariffs on Chinese dairy equipment selling to America.

More immediate concerns have centred on what might happen to US dairy stocks normally sold to China, particularly if American farmers maintain production, insulated by President Donald Trump’s $6.6 billion subsidy package released in September. It could see a product, particularly milk powder, butter and cheese, offloaded into new markets and weighing down global prices.

But, overall the signals and investment coming into Australia in the past five years suggest the global companies are excited by the growth on our doorstep and they want to be part of our predominantly pasture-based dairy industry’s diverse export opportunities.

Australia was also fortunate to have a diverse portfolio of exports, not weighted heavily towards bulk commodity products such as milk powder – a mainstay for NZ.

One of our biggest growth areas, aside from nutritional formula products, was the market for pizza cheese and other cheeses generally.

Japan, already Australia’s biggest cheese buyer, is our second largest dairy customer worth $430 million. Despite being a developed economy Japan still had plenty of growth potential for exporters. Its domestic dairy herd production was declining and national dairy consumption, at 85 litres per capita, was still well behind Australia at 300 litres.

Thus we can say that there is going to be a minimal impact on Australian Dairy industry as such and something we can easily ride. 


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