Australian Dairy Farmers Essay

Question:

Analyse and Interpret data to assess the Competitive Challenges and Opportunities facing a specific sector of the Food Industry.

Answer:

Introduction

Australia is not a big producer of milk but it is the 3rd largest dairy exporter in the world and they export 50% of their production. After wheat and beef, it is their 3rd largest rural industry with a gross value of $4 billion. Among the dairy products they produce milk, yoghurt, milk powder, cheese and butter. The sector is mainly spread in south- eastern parts of Australia with Victoria being the largest producer. Production in Victoria is mainly seasonal and their entry in the export market makes them susceptible to unpredictable global prices. Other areas which produce dairy products provide the domestic market for an all year production (Barkema et al., 2015).

About the industry

In 1788, the first dairy cows had arrived in Australia. They had faced problems with poor grazing condition and fodder. Lack of refrigeration referred to the prior serving of the domestic market by the Australian industry. Most of the production areas were situated close to the consumers so that they could be easily accessible. With the advancement of refrigeration, there was commercialization in the industry. It became possible for the farmers to increase their profitability and efficiency. For ease of transporting, processing and marketing of the milk produced by the farmers, cooperatives were established. But with the corporatization of those cooperatives it became a challenge for the dairy farmers again to gain profit or increase their productivity and efficiency (Beggs et al., 2015). Few important facts are given in the following table.

Fig- Dairy facts in Australia

Source- Buys et al.,2014

Challenges and opportunities

The modification in the Australian dairy industry has put it in a favorable condition as compared to other sectors of the food industry. It has helped in increasing the technical efficiency and strong herd genetics. The following figure will help in portraying the SWOT analysis of the industry.

Strengths- increased efficiency in production; in a stable position for export market; strong hold in the export business

Opportunities- risk in the management of production; rise in demand from the Asian countries; achieving greater efficiency in the market

Weakness- unpredictable climatic condition; purchasing and selling of retail and wholesale products; uncertain policy and rules

Threats- change in the climate; protectionism in the competitive market; input prices

Recently there are various challenges faced by the Australian dairy industry along its supply chain. The different stages in the supply chain include input, production, processing, exporting, manufacturing and retailing of milk and milk products. There is volatility in the price along with a decrease in price at the input level. Uncertainty and unavailability of water due to scarcity of rain and increase in urbanization is a threat to the dairy industry. The investment and adaptation in the production stage and restructuring might be a challenge for the dairy industry (Byrne et al., 2016).


Production factors and international demand are the major criteria which tend to be an opportunity for the dairy industry of Australia. It is important for the production system to adapt to the uncertainty in climatic condition and increase in volatility of market. The deregulation in the dairy industry with a clear focus on has been favorable to meet with the increased global demand. This demand in the developing markets has not decreased with the increase in prices. Demand markets are also important for the benefit of Australia’s industry. It has led to an increase of 33% in the consumption of dairy products. Increase in the price of oil is directly proportional to income and demand. Domestic production rate will be limited which signifies that the growth in demand will be met by the import business. There is a strong relationship between the Australian dairy industry and developing markets (Moate et al., 2014).

Analysis and interpretation

Future of the dairy industry among farmers as measured by NDFS has decreased from 67% in 2016 to 53% in 2017. A study has also showed that the profitability for three years is so low that 45% of farmers when surveyed anticipated a profit in 2016- 17. Improved margins have controlled the decrease in milk production and there has been an increase of 3.8% in the overall demand for export.

Fig- Export share and region- wise analysis

Source- Nettle, Brightling & Hope, 2013

Fig- Australian milk production (billion litres)

Source- Byrne et al., 2016

ADF or Australian Dairy Farmers Ltd is a non- profitable organization which takes care of the interests of the dairy farmers. They get the partial funding of 30% from voluntary fees, members of the organization and some income from the fund.

Fig- Statistics of Australian dairy industry (2009- 10)

Source- Regulations, 2013

The supplementary food or grain is becoming common as the Australian dairy industry is based on pasture. The industry gets an added value through processing and manufacture of milk and milk products.

Overview

The dairy industry of Australia is well stocked with government interventions. This results in the use of inefficient resource and increase in the price of milk and milk products. This intervention causes a virtual distinction between the two types of milk used for consumption and manufacturing of dairy products. Price of market milk is higher than manufacturing milk even though there is no difference. The kinds of intervention are- regulated price of milk in all the states, definite quota for market milk, regulation in the processing and distribution of milk, regulation in the retail prices of market milk in almost all the states, limitation in some states for trading of market milk, tariff quota for restriction on the import of cheese and control on the export business by the statutory bodies.

Conclusion

The strong relationship between of the Australian dairy industry and the developing market has lead to increased growth and export. The demand of the market has also increased the awareness about the nutritional value of milk. Although the dairy industry has faced remarkable challenges like financial crisis, drought and deregulation but their ability to face such difficult situations with collective actions has proven has helped in attaining success. The major element of success for the dairy industry is the policy environment which helps it to adapt and develop. Competition in the processing and functioning of dairy industry ensures options for the stakeholders while selling and purchasing the dairy products.

References

Barkema, H. W., Von Keyserlingk, M. A. G., Kastelic, J. P., Lam, T. J. G. M., Luby, C., Roy, J. P., ... & Kelton, D. F. (2015). Invited review: Changes in the dairy industry affecting dairy cattle health and welfare. Journal of dairy science, 98(11), 7426-7445.

Beggs, D. S., Fisher, A. D., Jongman, E. C., & Hemsworth, P. H. (2015). A survey of Australian dairy farmers to investigate animal welfare risks associated with increasing scale of production. Journal of dairy science, 98(8), 5330-5338.

Buys, L., Mengersen, K., Johnson, S., van Buuren, N., & Chauvin, A. (2014). Creating a Sustainability Scorecard as a predictive tool for measuring the complex social, economic and environmental impacts of industries, a case study: Assessing the viability and sustainability of the dairy industry. Journal of environmental management, 133, 184-192.

Byrne, T. J., Santos, B. F. S., Amer, P. R., Martin-Collado, D., Pryce, J. E., & Axford, M. (2016). New breeding objectives and selection indices for the Australian dairy industry. Journal of dairy science, 99(10), 8146-8167.

Moate, P. J., Williams, S. R. O., Deighton, M. H., Pryce, J. E., Hayes, B. J., Jacobs, J. L., ... & Wales, W. J. (2014, November). Mitigation of enteric methane emissions from the Australian dairy industry. In Proceedings of the 6th Australasian dairy science symposium (pp. 19-21).

Nettle, R., Brightling, P., & Hope, A. (2013). How programme teams progress agricultural innovation in the Australian dairy industry. The Journal of Agricultural Education and Extension, 19(3), 271-290.

Rad, S. J., & Lewis, M. J. (2014). Water utilisation, energy utilisation and waste water management in the dairy industry: a review. International Journal of Dairy Technology, 67(1), 1-20.

Regulations, P. (2013). Australian Dairy Industry.

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