Australian dairy farmers are facing tough times as a surge of cheap imports from New Zealand floods supermarket shelves. Despite farmers receiving record-high prices for their milk, prices have begun to drop sharply in New Zealand, making Kiwi imports more attractive to Australian consumers.
The world’s biggest dairy exporter, Fonterra, has committed to paying Australian farmers $9.55/kg for milk solids, compared to cutting the price it pays New Zealand farmers to $NZ8.20/kg ($7.67) to $NZ8.80/kg on milk solids.
This almost $2/kg price gap has led to New Zealand cheese and butter being priced significantly lower than Australian-produced products. The Dairy Australia report cites NielsenIQ data, revealing that 33.8% of Australian households are shopping at four different supermarkets in search of cheaper options.
Australia’s dairy industry has been in crisis mode, with milk production falling over the past four years due to drought, higher water and feed prices, labour shortages, and the fallout from the war in Ukraine.
Since late 2018, the national milk pool has lost around 1 billion litres of supply, with over a third of that loss in northern Victoria, while the dairy-rich western part of the state and South Australia have shrunk by almost a quarter.
The rapid contraction has made Australian dairy products less competitive, leading to increased imports of dairy ingredients and retail-ready products, such as milk powders for infant formula.
As the Reserve Bank of Australia embarks on its most aggressive series of interest rate rises in 30 years, the cost of living is a priority for Australian households, making it harder for local farmers to compete with imported products.
New Zealand prices are more reliant on global markets, as the nation exports around 90% of its products. Domestic milk production falling and cheaper global dairy commodity prices have made imports more attractive for Australia.
Despite Woolworths sourcing all its fresh milk and the “vast majority” of other dairy products from Australia, it has awarded $2m in grants via its Dairy Innovation Fund to more than 20 Australian dairy farms to support on-farm investments that boost efficiency, technology, or resilience.
The supermarket chain also defends importing cheaper New Zealand products, stating that it wants to ensure customers have access to great value and quality dairy products, reflecting the shelf price.