The liquid 'drinking' milk market remains of key importance to Australia's dairy sector - with improved domestic retail pricing and opportunities for further export growth - according to industry analyst Rabobank.
In "Australia's Drinking Milk Markets: from Loss Leader to Improving Performer", the specialist agribusiness bank says the liquid milk category - which in recent years had struggled with a number of challenges - remained a major "pillar" for Australia's dairy sector.
Rabobank found it accounted for 30 per cent of milk production and generated more than A$4 billion in revenue annually.
And this was important not only for revenue generation, but also strategically for supply chain efficiency, helping to support the Australian "dairy value chain and lead to stable farmgate milk prices over multiple seasons, the report says.
"Drinking milk, being a staple product in the consumer basket, will remain a large and important category for Australian milk utilisation," the Rabobank report said.
Australia's domestic drinking milk market was mature, with falling domestic consumption being offset by growing exports of liquid milk, according to report author, Rabobank senior dairy analyst Michael Harvey.
"As we begin 2023, the market is experiencing a structural increase in consumer prices across the dairy aisle, led by drinking milk in particular," Mr Harvey said.
"This has been driven by dairy processors passing through record-high farmgate milk prices and higher supply chain costs, along with tight supply due to declining Australian milk production.
"An extended period of industry-related disruption and low margins is slowly coming to an end".
He said for farmers higher consumer prices for milk and dairy products, across supermarket aisles, was welcome news.
It would solidify the end of frustrations over the discounting of drinking milk, he said.
"Additionally, it will ensure higher and more stable returns for the market and mitigate the potential volatility in returns in other channels - both onshore and offshore - for those with access to the drinking milk market," he said.
Read more:
In 2021/2022, according to Dairy Australia, Australians consumed more than 2.5 billion litres of drinking milk, approximately 30 per cent of the estimated 8.554 billion litres of raw milk produced in Australia for that year
The remainder went into manufacturing of dairy products and ingredients for the domestic and export markets.
The Rabobank report also found Australia's per capita consumption of liquid milk ranked among the highest in the world.
"The average Australian consumes a large volume of drinking milk, ranking only behind Ireland, Finland and New Zealand according to the International Dairy Federation," Mr Harvey said.
"In 2021/22, Australian per capita consumption of milk stood at 93 litres per person for the year, which equals just over 250 millilitres per day."
Full cream milk was "category king", equating to 56pc of all drinking milk sold in the country.
Domestic consumption was trending lower, as dietary habits shifted, a trend expected to continue into the medium term, he said.
Dairy Australia figures indicate domestic milk consumption peaked in 2012/13 at 106.7 litres per person and has since fallen by 13pc.
And in 2021/22, total drinking milk consumption in Australia contracted by 1.1pc or 36 million litres.
"This is not a story unique to Australia, however," Mr Harvey said.
However, the report found it was not all bad news for domestic dairy, with consumers simply consuming dairy in different forms.
"While fluid milk consumption is declining, other categories - such as cheese - continue to grow," Mr Harvey said.
Export volumes of Australian liquid/drinking milk had also been growing, the report said, with the total volume exported increasing by more than 200 million litres annually over the past decade.
In 2021/22, Australian exported more than 380 million litres of packaged milk to offshore markets.
Between 2012 and 2022, Australia's exports of liquid milk grew by an average of 17pc each year.
The 'Greater China' markets - of mainland China, Hong Kong, Macau and Taiwan - had underpinned that export growth, the report said.
Subscribers have access to download our free app today from the App Store or Google Play.
