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Falling Australian dollar offers local dairy exporters bigger opportunity in Asia

2019-11-08 13:46 Friday

As the value of the Australian dollar declines, it is delivering added competitive value to the country's dairy export industry – especially in filling growing demand in China and other countries – according to local experts.


"A more competitive dollar is giving us more chances to get product into China and other opportunistic market openings" said Dairy Australia's trade and industry strategy manager, Charles McElhone.

This contrasts with tougher conditions for imports in the domestic dairy market, where locally-made produce has been under relentless pricing pressure for the past five years.

The sliding exchange rate is likely to continue to dip further, say analysts, providing an inconvenient price challenge to importers in Australia buying goods from elsewhere.

Although the country still rates as a leading global dairy exporter in its own right, selling 35% of production overseas, it also imports from New Zealand, the US and Europe to the tune of about 330,000 tonnes every year.

That is about twice the volume imported back in 2012-13 and over three times as much as it was bringing into its ports from overseas at the start of the 21st century.

With the Australian dollar trending down from U.S.$ 0.74 a year ago to lows of around U.S.$ 0.67 earlier this month, retailers and importers are reassessing their options.

Australian milk production has nose-dived in the past several years owing to drought and the disruption which accompanied the collapse of major processor, Murray Goulburn.

With a smaller pool of milk suppliers to draw on, local dairy processors have focused on making the most from targeting premium-value domestic or overseas buyers, especially as the falling currency has made export sales worth even more.

"The reality is we benefit a lot from a lower dollar, even though we mightn't be producing as much milk or exporting as much of some products as we used to," commented McElhone.

"Processors are taking higher value routes and becoming more selective about where they place products and the markets they choose to chase," he said.

Higher global dairy commodity prices and shrinking national milk production – down by about 8.5 percent to 8.5bn liters in 2018-19 – has meant Australian processors are paying less interest to the markets for traditional bulk milk powder, bulk cheese and butter.

"They may still do a lot of cheese, but we are seeing our processors targeting more select markets – less into the Middle East and more focus on specific products for retailers in China, Japan or South East Asia.

The lower dollar would also be increasingly valuable in helping the country's $ 3bn a year dairy export trade fend off competition with the States as its tariff war with China has forced North American dairy producers to seek out new buyers for product previously sent to Chinese consumers.

"However, over time the States will have to open up new markets and there will be a lot of disruption to global trade," added McElhone.

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