Australian Dairy Industry Analysis

The assignment requires an analysis of the Australian dairy industry, taking into account its social, economic, and environmental impacts. Students are to utilize provided research articles focusing on various aspects of the industry including sustainability, deregulation, innovation, farm management practices, and gender dynamics within the sector. The analysis should draw upon these sources to provide a comprehensive understanding of the current state and challenges facing the Australian dairy industry.

Running head: THE AUSTRALIAN DAIRY INDUSTRY
Australian Dairy Industry analysis
Name of the Student:
Name of the University:
Author note:

1
THE AUSTRALIAN DAIRY INDUSTRY
Executive summary
The text in the report analyses the charts that are gathered on Australian Dairy Industry. The
internal and external factors that affects the industry. The global position of the industry and
what are the strategic and innovative steps that they have taken to remain one of the largest
competitors in the world.

2
THE AUSTRALIAN DAIRY INDUSTRY
Table of Contents
Introduction......................................................................................................................................4
Domestic market..............................................................................................................................4
International market.........................................................................................................................5
International trade scenario..............................................................................................................6
Export share of trade........................................................................................................................7
Milk and it’s derivative products life cycle.....................................................................................8
Australia export by region...............................................................................................................9
Industry analysis............................................................................................................................10
Internal value chain analysis.........................................................................................................11
Industry structure and regional strength........................................................................................12
External..........................................................................................................................................13
Issues and challenges faced by the industry in global competition...............................................13
Strengths and weakness Opportunities and threats of the industry...............................................13
Strategic analysis...........................................................................................................................15
Porter’s values chain analysis........................................................................................................15
Conclusion.....................................................................................................................................16
Reference.......................................................................................................................................17

3
THE AUSTRALIAN DAIRY INDUSTRY

4
THE AUSTRALIAN DAIRY INDUSTRY
Introduction
Australian industry is one of the most agriculture intensive industries comparing with the
global agriculture market. Victoria is dominant in dairy and herd production. The evolution o f
technology has served them well and their productivity has increased since last three decades
(Klerkx and Nettle, 2013). The small farmers were able to generate the derivative products of
milk and supported to the revenue that every individual state made in the following years.
According to the dairy situation and outlook report on 2017 the farmers have produced 700
million fewer litters of milk due to a huge crisis that have hit the whole Australia in the last year
(Sorensen, 2011). However, the consumption of the branded products has not lessened. Victoria
being the centre of production has seen 9% growth in the full cream milk production (Klerkx and
Nettle, 2013). Whereas Australia accounts for an approximate 2% of the world’s milk
production, it is a noteworthy exporter of dairy merchandise (Regulations, 2013). The Australian
dairy industry was significantly challenged by deregulation, droughts and the financial crisis.
However, the industry has also been seen to to adapt to difficult situations through sharing its
view of the challenges and opportunities and with collective action. One crucial feature for their
success now would be the policy control of the environmental factors, which is an important role
in accordance with the industry to adapt in the future and further develop.
Domestic market
The Australian Dairy industry is a fully established industry and some subtropical areas
of Australia is also rich in giving supply to its customers. Even though most of the country’s
milk production takes place in south‐east seaboard parts states, all states have separate dairy
farms that supply fresh drinking milk to close by cities and towns.

5
THE AUSTRALIAN DAIRY INDUSTRY
Australian milk production has been steadily increasing with the demand and modified derivative
product of milk. Fresh milk, butter, cheese, milk powders, whey products and casein (Sorensen,
2011).
International market
The New Zealand statistics shows that, they are one among the key industries in the dairy
production (Klerkx and Nettle, 2013). The organization is able to satisfy the thirst of the country
and whole world’s demand of milk and its side products. The small shelf life of milk means that
Australia’s export percentage of fresh milk is partial mainly to UHT product. Around 80% of
Australia’s fresh milk exports goes to Asia with a further 15% intended for the Pacific region
(Regulations, 2013). The cheese industry itself exports to 50% of the domestic production. This
industry itself is a predominantly developed in the national region. The Skimmed milk powder
and the whole milk powder accounts to 80% of the
National dairy herd 1.6 million
Average herd size 220 cows
National milk production 9 billion litres
Dairy workforce 40,000*2.5
Figure: Australian consumption statistics(Australian-dairy-industry, 2017)

6
THE AUSTRALIAN DAIRY INDUSTRY
New Zealand - the major competitor of Australia is one of the most aggressive seller in the
international market.
Total number of herds 11,918
Average herd size 419
Number of cows 5 million
Effective hectares in production New Zealand 1.8 million
Milk processed by dairy companies 21.0 billion litres(2015-2016)
Figure: Australian consumption statistics (Australian-dairy-industry, 2017)
International trade scenario
The dairy research and development of organisations major contributor is federal
government. The trade policy is in the industry is favourable for the industry. The three core
business objectives in the dairy planning cycle is escalating farm productivity, maintain and
develop value-added service, channels, products, high-margin and others. Promote and protect
the unique profit of Australian dairy industry. ADF is formed by Australian farmer’s
organisation and there is the help the small farmers get from non-profit organisations
(Regulations, 2013). Southeast Asian market is Australia’s largest export oriented market.
Stipulation from this market has led to a 33% enhanced in international dairy and its derivative’s
consumption in the last decade(Grace and Lennie, 2012). Even though there are hurdles to give
services and sell in this market, the Ausi’s are confident enough that demand expansion is high.
It is implied that economic prosperity and higher education enabled system will spreads all
through the core region and there will be steady escalation in demand. The China, Africa, and

7
THE AUSTRALIAN DAIRY INDUSTRY
Middle East are the one among the major exporters of the dairy products and consume the major
percentage of the products (Grace and Lennie, 2012).
The Australian market has strength in the domestic market and furthermore, they are
milk’s multinational value increment (Sorensen, 2011). The derivatives of the main product are
also capturing the completely international market competing with the value-addition and
prospective consumption market percentage (Nettle, Paine and Penry, 2010).
However, the trade regulations of the industry have to face some highly contingency
factors. This includes the China and Middle East’s production and expansion in the regarding
instruction (Nettle, Paine and Penry, 2010). The Neighbouring countries production and their
strong economic condition can be highly competitive in the recent years inferred from the above
table. European’s balance and protectionist has long since given headache to the trade enablers in
the international market. Their products are facing headed competition with the former dairy
market leaders (Grace and Lennie, 2012). The prices of the products are also volatile because of
dynamic supply-demand ration working in the industry.
Export share of trade
EU 32%
New Zealand 35%
Australia 10%
USA 7%
Argentina 4%
Ukraine 2%
Uruguay 1%

8
THE AUSTRALIAN DAIRY INDUSTRY
Other 9%
32%
35%
10%
7%
4%
2%1% 9%
EU
New Zealand
Australia
USA
Argentina
Ukraine
Uruguay
Other
Figure: Australian consumption statistics (Australian-dairy-industry, 2017)
Milk and it’s derivative products life cycle
The most consumption is in the fresh milk sector and the stage is by drinking (Nettle,
Brightling and Hope, 2013). The drinking milk, butter, cheese, yogurt are the majorly consumed
product among the country the statistics of per capita is given below.
Commodity Consumption(per capita/annum)
Milk 102 litres
Cheese 13kg
Butter 4 kg
Yogurt 7 kg

9
THE AUSTRALIAN DAIRY INDUSTRY
Figure: Australian consumption statistics(Australian-dairy-industry, 2017)
Australia export by region

10
THE AUSTRALIAN DAIRY INDUSTRY
South
East Asia Japan America Africa Middle
east Europe Other
Asia
0%
5%
10%
15%
20%
25%
30%
35%
30%
19%
5% 4%
10%
2%
24%
Series1
South East Asia 30%
Japan 19%
America 5%
Africa 4%
Middle east 10%
Europe 2%
Other Asia 24%
Figure: Australia export by region Australia (Abs.gov.au, 2017)
Industry analysis
Competition

11
THE AUSTRALIAN DAIRY INDUSTRY
Internal value chain analysis– Australian dairy industry’s largest producer was Victoria
accounting for supplying 60% of the national milk consumption (Backus, Eidman and
Dijkhuizen, 2012). The Southern, Central, Coastal NSW Dairy industry produces diverse milk
production as they have land grass and fodder growing areas (Edwards, 2003). The market
influences are one among the major factor for fresh milk production. The processor authority
prefers local and reliably produced milk, which helps them in cost reduction and logistics
handling. This region produces among the 741 million litres of milk and 8% of Australia’s
production milk (Nettle, Brightling and Hope, 2013). The level of risk for adaptation and
investment may affect production of milk. Second, major reformation is likely to be made at
milk production stage in some challenging regions, which will in turn will affect on the current
system and structure (Buys et al.2014). Third, the Emission Trading Scheme of the country,
paired with a limited growth of production and increased ethical standards, everything have the
potential headed for raising costs above competitors, and this may affect the competitiveness and
price of Australian products (Von et al., 2013).

12
THE AUSTRALIAN DAIRY INDUSTRY
Industry structure and regional strength
The Gippsland dairy industry
Western Victoria dairy industry
Murray dairy industry
Southern dairy industry
Tasmanian dairy industry
Western Australian Dairy Industry
0%
5%
10%
15%
20%
25% 22% 23% 21%
7% 7%
21%
Series1
The Gippsland dairy industry 2 billion (22%)
Western Victoria dairy industry 2 billion (23%)
Murray dairy industry 1.84 billion (20.5%)
Southern dairy industry 620 million (7%)
Tasmanian dairy industry 650 million (7%)
Western Australian Dairy Industry 338 million litres(20.5%)
Figure: Different player in the internal market of Australia (Abs.gov.au, 2017)
Different innovative products like fresh dairy products and stream included drinking milk
and othere customised products and dairy desserts. Specialised ingredients and whey proteins,
SMP, BMP and WMP are high valued manufactured products (Von et al., 2013). There are also
schemes, centres that helps people in the industry to operate efficiently. The Australian Dairy
Herd Impovemnet Scheme, Dairy Extension Centre, Dairy Futures Cooperative Research

13
THE AUSTRALIAN DAIRY INDUSTRY
Centre(CRC), Dairy Innovation Australia Limited, Department of primary history Victoria
(Backus, Eidman and Dijkhuizen, 2012). The national bodies which helps in this are National
Heritage trust, National landscape program, NSW department and primary Industries, Tasmanian
Institute and Heritage trust are one of the major investor in the innovation program and dynamic
strategy faces challenges in the regarding Industry(Gourley et al., 2012).
External
Issues and challenges faced by the industry in global competition.
There are many challenges that the manufacturing industry faces in the production
procedure. The volatility of the supply and demand market and customer’s preference in the
different products. The global crisis on 2008-2009 has been the most difficult period for the
Industry (Bethune et al. 2004). However, the prices of the products have come down due to the
consumption pattern changes and outlook of retail stages have gone down due to the
competitiveness of the food safety (Edwards, 2003). In addition there is a decline in inflationary
pressure, that additionally benefits the selling of dairy products.
Strengths and weakness Opportunities and threats of the industry
Strengths
 As the historical data suggest that the dairy industry have grown in the last three decades
they have incorporated efficient production methods
 The position of this industry is strong in the export market and have seen steady growth
of 9% (Gourley et al., 2012).

14
THE AUSTRALIAN DAIRY INDUSTRY
 The Australian industry is one of the major exporters, as in third largest exporter on milk
and its derivative products.
The industry also have a backup of investors willing to contribute in the research and
development in dairy manufacturing and value added products, as well as the packaging and
customising the products (Bethune et al. 2004).
Weakness
 The weakness is seen to be in the demand factor. The domestic market of the industry
faces the volatility of climate. The agricultural sector has always been prone to volatility
of climate change factors.
 The retail sell and wholesale industry of milk faces a major problem of having shelf life
of the products.
 Policy uncertainty of the trade practises has been one of the major weaknesses of the
industry.
Opportunity
 Management of production risk less
 Demand of all Australian milk products in Asia
 Greater efficiency scale of the industry
Threats
 The production cost
 Climate change in agricultural business

15
THE AUSTRALIAN DAIRY INDUSTRY
Strategic analysis
Porter’s values chain analysis
Barriers to entry – the Australian diary industry has been strong since 1989 revolution in the
industry (Soliman, 2000). However, the recent crisis in the milk production of the industry and
shortage in the production has lead to crisis in the international market reputation. The domestic
industry factors are strong to retaliate against (Gourley et al., 2012). Therefore, the risk to entry
of global competitors is less.
Threat of rival - the major threat in the industry is the water availability in the agro-cultivated
land but the industry is facing certain policy related problem on the state of Victoria. The other
industries are there to give competition to this industry in this matter. The deregulation of this
industry has left some uncertainty in the boar (Buys et l.2014). The rationalisation of this
industry has left the core efficient producers weak to international competitors vulnerable and
heavily subsided. The main competitors of this industry are China and Africa.
Threat of substitute – the products itself does not have good substitute. However, the competitors
pose a challenge in building the good substitute brand for the company.
Threat of supplier – The supplier market is dominative in this particular industry. The suppliers
have different board of co-operation and back up of having investments from the government
subsidiary bodies (Grace and Lennie, 2012). The total industry is private and deregulated in
Australia.
Threat of customers -the risk in threat of customers is less than any other industry. The
customers are less prone to go to other products than the fresh produce of the domestic

16
THE AUSTRALIAN DAIRY INDUSTRY
companies (Nettle, Brightling and Hope, 2013). However, the global competitor’s dairy products
and their innovative products may inherit a threat to competitors.
Conclusion
The Australian dairy industry is certainly a self-sufficient and competitive enough in the
global context. There is direct employment in the region of Australia for around 40,000 people
and additional downstream processing. This industry is one of Australia’s major industries that
contribute to the economic development. Australia ranks third in terms of global dairy trade with
10% share of world dairy export followed by New Zealand and the European Union. In response
to these discussed challenges, a variety of strategies well as actions and plan have been
redirected or executed by the industry in respect to the industry’s production systems, response
to environmental change and natural resource management, and market access. In a nutshell, the
Australian dairy industry has faced significant challenges like deregulation, droughts and the
financial crisis. However, the industry has also demonstrated its ability to adapt to difficult
situations through sharing its view of the challenges and opportunities and addressing these
challenges with collective action.

17
THE AUSTRALIAN DAIRY INDUSTRY
Reference
Abs.gov.au. 2017. 1301.0 - Year Book Australia, 2004. [online] Available at:
http://www.abs.gov.au/Ausstats/abs@.nsf/0/B006A83A9127B0F5CA256DEA00053965?Open
[Accessed 29 Aug. 2017].
http://www.pwc.com.au/industry/agribusiness/assets/australian-dairy-industry-nov11.pdf
[Accessed 29 Aug. 2017].
Backus, G.B.C., Eidman, V.R. and Dijkhuizen, A.A., 2012. Farm decision making under risk and
uncertainty. NJAS wageningen journal of life sciences, 45(2), pp.307-328.
Bethune, M. and Armstrong, D.P., 2004. Overview of the irrigated dairy industry in
Australia. Australian Journal of Experimental Agriculture, 44(2), pp.127-129.
Buys, L., Mengersen, K., Johnson, S., van Buuren, N. and 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, pp.184-192.
Edwards, G., 2003. The story of deregulation in the dairy industry. Australian Journal of
Agricultural and Resource Economics, 47(1), pp.75-98.
Gourley, C.J., Dougherty, W.J., Weaver, D.M., Aarons, S.R., Awty, I.M., Gibson, D.M.,
Hannah, M.C., Smith, A.P. and Peverill, K.I., 2012. Farm-scale nitrogen, phosphorus, potassium
and sulfur balances and use efficiencies on Australian dairy farms. Animal Production
Science, 52(10), pp.929-944.

18
THE AUSTRALIAN DAIRY INDUSTRY
Grace, M. and Lennie, J., 2012. Constructing and reconstructing rural women in Australia: The
politics of change, diversity and identity. Sociologia Ruralis, 38(3), pp.351-370.
Klerkx, L. and Nettle, R., 2013. Achievements and challenges of innovation co-production
support initiatives in the Australian and Dutch dairy sectors: a comparative study. Food
Policy, 40, pp.74-89.
Klerkx, L. and Nettle, R., 2013. Achievements and challenges of innovation co-production
support initiatives in the Australian and Dutch dairy sectors: a comparative study. Food
Policy, 40, pp.74-89.
Nettle, R., Brightling, P. and Hope, A., 2013. How programme teams progress agricultural
innovation in the Australian dairy industry. The Journal of Agricultural Education and
Extension, 19(3), pp.271-290.
Nettle, R., Brightling, P. and Hope, A., 2013. How programme teams progress agricultural
innovation in the Australian dairy industry. The Journal of Agricultural Education and
Extension, 19(3), pp.271-290.
Nettle, R., Paine, M. and Penry, J., 2010. Aligning farm decision making and genetic information
systems to improve animal production: methodology and findings from the Australian dairy
industry. Animal Production Science, 50(6), pp.429-434.
Regulations, P., 2013. Australian Dairy Industry.
Soliman, F., 2000. Application of knowledge management for hazard analysis in the Australian
dairy industry. Journal of Knowledge Management, 4(4), pp.287-294.

19
THE AUSTRALIAN DAIRY INDUSTRY
Sorensen, T., 2011. Australian agricultural R&D and innovation systems. International Journal
of Foresight and Innovation Policy, 7(1-3), pp.192-212.
Von Keyserlingk, M.A.G., Martin, N.P., Kebreab, E., Knowlton, K.F., Grant, R.J., Stephenson,
M., Sniffen, C.J., Harner, J.P., Wright, A.D. and Smith, S.I., 2013. Invited review: Sustainability
of the US dairy industry. Journal of dairy science, 96(9), pp.5405-5425.