Two men who sell our dairy products to international customers say the fallout of the pandemic may be yet to hit Australia and falling national milk production is a threat to exports.
Participating in a Dairy Australia webinar this morning, Burra Foods commercial general manager Dale O'Neill said as production fell, there was less milk available for export, raising concerns for buyers.
"When we're out in the market and talking to customers regularly, it's not really the price or quality, the first thing they ask is actually reliability and sustainability of supply," he said.
In its Situation & Outlook report released this week, DA projected a 1-3 per cent drop in production for the current year, putting the annual total between 8.5 and 8.7 billion litres.
Nationally, the five months to April were all higher than the same time last year and DA forecasts milk production to grow by 1-3pc in 2020-21.
"That uptick in volume will actually drive back that confidence from an Australian point of view and 'brand Australia' point of view, so I see it as a good thing," Mr O'Neill said.
Mr O'Neill said there still opportunities for Australia to grow exports, particularly in Indonesia, but also Vietnam, Malaysia and Thailand.
But he was also quick to emphasis the serious risks the pandemic's impact posed for "everyone" in the supply chain.
"We're seeing some of the traders overseas carry stocks and some manufacturers in our destination markets perhaps building some stocks from local domestic production," Mr O'Neill said.
"Take China, for example, where they were still producing quite a lot of milk that had to find a home.
"That's gone into a lot of powder, so a lot of the manufacturers are still carrying relatively high stocks, particularly of full cream milk powder."
Ausfine Foods sales director Matt Cooper pointed to "phenomenal" volatility, not just in product pricing but exchange rates and shipping, too.
Some infant formula and nutritional products manufacturers had been "a little bit spooked" by the risk of shipping delays, which had driven short-term demand for powder.
"A lot of the buying has been driven by replenishing some inventories and perhaps holding a little higher inventories than what they typically would to mitigate those shipping risks going forward," Mr Cooper said.
"The result of that has been some rebounding in the pricing on skim milk powder ... but customers who are happy to buy today may not necessarily be buying too far forward."
Mr Cooper said it all made accurate forecasting impossible.
"Anyone who really thinks they can predict what will happen in the next six months is delusional," he said.
But Mr O'Neill said exports to China was not as vulnerable to trade stoushes as other agricultural products.
"From a China perspective, dairy is seen as an essential product, it's really been promoted for good health. So I think that probably de-risks it somewhat," he said.
I think wine and beef are often seen as perhaps more luxury goods ... so we'd say they're in a potentially higher risk category.
"But we can never be too careful and when we operate in any of these markets, including China, it's about making sure that all the processes, all the documentation, is always in place and correct and that minimises that risk."
The domestic market was also uncertain, Neilson associate director fresh analytics Melanie Norris said, with two groups of consumers: those insulated from the crisis and constrained spenders, with job problems and a lot of financial pressure.
"Demand in such a great time of economic impact is going to change and value for money products are going to become very important," she said.
Cheap product imported from New Zealand was likely to continue to impact the domestic market, too, but Mr Cooper said there was a silver lining.
"Brand Australia is still really strong internationally; we do get a premium or the other markets ... we're exporting Australian product into quite often high value returning markets ... so it's not necessarily just that binary 'imports are bad' situation because sometimes we can get a better return into other markets," he said.
"But I don't think it's going away; the Kiwis do eye off the Australian market with glee sometimes, and will continue to push in here as much as they can, I believe."
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