The Australian Dairy Industry
A summary of Australia's dairy industry and its importance to rural economies.
Prior to its deregulation in 2000, Australia's dairy industry developed through the gradual amalgamation of small scale regional dairies and butter factories which serviced local communities around the country.
Advances in refrigeration enabled the industry to become more commercialised and cooperatives were formed to collect, process and market milk and other dairy products on behalf of farmers.
Herd sizes grew as dairy farmers strove for productivity gains and efficiency. State governments controlled fresh milk pricing and state dairy corporations regulated milk quality and controlled production. State policies saw farmers receive a higher price for selling their milk into the domestic market than milk sold for the export market.
In early 1999, the Australian Dairy Industry Council approached the Federal Government with a plan for an orderly, national approach to the deregulation of the drinking milk sector in conjunction with the end of manufacturing milk price support.
In September 1999, the government announced it would implement the Dairy Structural Adjustment Program (DSAP). AS part of the program, a Dairy Adjustment Levy of 11 cents per litre was applied on retail purchases of dairy beverages. This levy funded quarterly DSAP payments to Australian dairy farmers over the next eight years worth $1.73 billion, to assist them to make the necessary adjustments to a deregulated environment, with minimal social and economic disruption.
As the last steps were taken in the deregulation process, all states repealed legislation governing sourcing and pricing of drinking milk. The state milk authorities, which administered these controls, were wound up from 1 July 2000.
The impact of deregulation at the farm level varied across the different states of Australia. The impact was very much dependent on how important drinking milk (with its regulated higher farmgate price) was to the individual farm enterprise in relation to their total milk production. A number of farmers took advantage of the exit payments offered under the DSAP scheme to leave the industry.
The overall impact was a decrease in the number of farms, which was simply the continuation of an industry trend that had been apparent for over three decades. As a result of deregulation, the number of dairy farms has fallen from 12,500 to approximately 5,200 today.
Australian dairy farmers now operate in a completely deregulated industry environment, where international prices are the major factor in determining the price received by farmers for their milk. The industry has further consolidated and corporatised in the period since deregulation and a number of major cooperatives are now owned by multinational companies.