Production Summary

As in the farm sector, the milk processing sector is undergoing continuing rationalisation. This has resulted in improved factory capacity, as larger operations have improved their efficiency and economies of scale. The lack of growth in milk production over the past six years has relieved the pressure on Australian dairy companies to continue to invest in increasing processing capacity – at least in the short to medium term. Instead, the challenge has been to remove surplus capacity and to utilise the existing capacity as profitably as possible.

The Australian dairy manufacturing sector is quite diverse and includes farmerowned co-operatives, public, private and multi-national companies.

Co-operatives no longer dominate the industry and now account for approximately 40% of Australia’s milk production. The largest is Murray Goulburn, accounting for some 35% of national milk output. Smaller regional co-operatives include Challenge Dairies, Norco and Hastings Valley.

Other Australian dairy companies cover a diverse range of markets and products, from the publicly listed Warrnambool Cheese and Butter Factory to the privately owned Bega Cheese Limited, Tatura Milk Industries, Regal Cream and Burra Foods, to name a few, together with many highly specialised cheese manufacturers.

Major multi-national dairy companies have operated in the Australian dairy industry for many years and currently include Fonterra, Kirin and Parmalat.

The major rationalisation event during 2008/09 was National Foods’ purchase of the Dairy Farmers Group in late-2008, which had significant implications for the domestic market. The ACCC – Australia’s national competition body – required divestiture of certain assets to ensure the state drinking milk markets remained competitive before giving approval for the takeover to proceed.

The major manufactured product streams are:
• drinking milk – fresh and UHT long-life;
• skim milk powder (SMP)/ buttermilk powder (BMP)/butter;
• butter/casein;
• cheese;
• wholemilk powder (WMP);
• other consumer products, such as yogurts, custards and dairy desserts; and
• specialised ingredients, such as whey proteins, nutraceuticals, etc.

Cheese is consistently the major product stream; utilising about one third of Australia’s milk production in 2008/09. This is slightly down on recent years. Skim milk powder/butter production was the next biggest user of milk; taking a quarter of all milk last year.

Australian production of dairy products (tonnes)

*Includes butter blends as CBE
**Includes infant powder
Source: Dairy manufacturers
 

Around 60% of manufactured product (in milk equivalent terms) is exported and the remaining 40% is sold on the Australian market. This contrasts with drinking milk, where some 97% is consumed in the domestic market.