Production summary

As in the farm sector, the milk processing sector is undergoing continuing rationalisation. This has resulted in improved factory capacity, as larger operations have improved their efficiency and economies of scale. The lack of growth in milk production over the past decade has relieved the pressure on Australian dairy companies to continue to invest in increasing processing capacity—at least in the short to medium term. Instead, the challenge has been to remove surplus capacity and to utilise the existing capacity as profitably as possible.

The Australian dairy manufacturing sector is diverse and includes farmer-owned co-operatives, public, private and multinational companies.

Farmer owned co-operatives no longer dominate the industry and now account for less than 35% of Australia’s milk production—of which the largest is Murray Goulburn accounting for over 30% of national milk output. Smaller regional cooperatives include Norco and Hastings Valley; both situated along the north coast of New South Wales.

Other Australian dairy companies cover a diverse range of markets and products, from the publicly listed Warrnambool Cheese and Butter and Bega Cheese Limited (who now own Tatura Milk Industries and De Cicco); to the privately owned Regal Cream, Burra Foods and Longwarry Food Park to name a few; together with many highly specialised cheese manufacturers.

Large multi-national dairy companies have operated in the Australian dairy industry for many years and currently include Fonterra (New Zealand), Kirin (Japan) and Lactalis (France) - who took over Italy's Parmalat in mid-2011.

There were a number of changes in the ownership of dairy companies in the Australian industry during the 2010/11 season.  Bega Cheese took a 15% share in Warrnambool Cheese and Butter.  Murray Goulburn withdrew a merger proposal with Warrnambol Cheese and Butter - but retained their 10% stake in the company.  Challenge Dairy, one of Western Australia's four major dairy processers, went into voluntary administration and closed down in late-2010.  Harvey Fresh subsequently purchased Challenge's assets including land, buildings, plant and equipment. 

Private equity from Archer Capital purchased Fonterra's Brownes (WA) dairy business through a company called the DairyWest Group.  Lion - Dairy and Drinks (formerly National Foods) announced a major rationalisation of its national cheese processing capacity, concentrating the majority of its operations in Tasmania.  Bega Cheese obtained shareholder approval and listed on the Australian stock exchange in August 2011 and soon after acquired the remaining 30% of Tatura Milk Industries that they previously didn't own.

The major manufactured product streams are:
• drinking milk—fresh and UHT long-life;
• skim milk powder (SMP)/buttermilk powder (BMP)/butter;
• butter/casein;
• cheese;
• wholemilk powder (WMP);
• other consumer products, such as yogurts, custards and dairy desserts; and
• specialised ingredients, such as whey proteins, nutraceuticals, etc.

Cheese is consistently the major product stream; utilising around one third of Australia’s milk production in 2010/11, and has remained at this level for a number of years.

Drinking milk and skim milk powder/butter production were the two next largest users of milk; each taking about a quarter of the total milk produced in Australia.

Around 60% of manufactured product (in milk equivalent terms) is exported and the remaining 40% is sold on the Australian market. This contrasts with drinking milk, where some 97% is consumed in the domestic market.

Australian production of dairy products (tonnes)

*Includes butter blends as CBE
**Includes infant powder
Source: Dairy manufacturers