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Dairy could be Australia’s next iron ore: Dairy Connect

Australia's dairy industry is set to enjoy a massive wave of demand from Asia, which could see dairy product volumes increase by 50 to 60 percent over the next decade.

At a briefing held in Sydney today, Dairy Connect NSW Limited's chief executive, Mike Logan, said Australia's dairy industry needs to look to Asia for future growth opportunities.

"The outlook for dairy today is very positive. Some analysts believe demand in Asia will be such that dairy products could be described as Australia’s new iron ore," he said.

"The Whole Milk Powder price on the Global Dairy Trade has taken a step up by about US$1,500 a tonne.

"The industry wants to grow; opportunities for growth are looming; and investment funds are available to finance that growth.

"Right now, the industry needs to move beyond the ‘$1 a litre’ supermarket milk war and, while maintaining the domestic dairy product market, must look to Asia for its future," Logan said.

Perhaps the greatest fresh milk opportunity for NSW dairy is the potential to export to Asia frozen milk in point of sale retail packaging. According to Logan, the product defrosts without separating and its use-by-date begins on defrosting, allowing a 14 day shelf life.

"New technology for rapidly freezing milk is becoming available and the product can be shipped at minus 18 degrees centigrade," he said.

"NSW has the cheapest shipping rates to China based on low cost back-loading."

This market is nearly unlimited, Logan said, adding that it could be bigger than the current NSW production capacity.

While the industry has not officially quantified possible growth volumes for the coming decade, Logan says his gut feeling was that the fresh milk market could grow by 10 percent.

"If we're talking frozen milk shipped out in refrigerated containers in retail packaging growth could be 30 to 40 percent and manufactured dairy products could grow by as much as 50 to 60 percent."

Negotiating export supply contracts with the processors is expected to be a bottleneck for this growth, Logan said, as well as supply the fact that demand may outweigh supply.

"The whole global dairy industry is flourishing. The market will be supply constrained. International analysts say supply growth is 2.2 percent per annum. Demand growth is 2.4 per cent per annum."

Dairy Connect sees itself playing a critical role in the dairy industry's relationship with Asia, acting as a quality assurance gateway.

"We want to provide the buyer with paddock to plate assurance of the quality and care of our product," Logan said. "Transparency from the farm, through the factory, the testing data, shipping details and in-country handling [is] paramount.

"This is our biggest risk as evidenced by the Fonterra experience in New Zealand this year. It is also, as an organised western economy, our biggest advantage."

 

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