The changing face of Australian dairy. Mick Keogh Australian Farm Institute

Transcription

1 The changing face of Australian dairy Mick Keogh Australian Farm Institute

2 10-20 year investment One to three years Within season/year

3 A changing business environment Changes at the farm level Future opportunities

4 Animal protein intake (Kcals/capita/day) Protein consumption and per capita income China Australia Japan Increasing wealth triggering growth in food consumption and changes in food choices in nations with large populations Developing nations adopting increased protein consumption, including dairy 200 India Indonesia 0 $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 $50,000 GDP per capita ($ ppp )

5 Changing markets Per capita consumption generally declining in wealthy nations Per capita consumption growing rapidly in emerging economies as middle-class grows Per capita consumption remains low in poorer nations.

6 Competition Major growth consists of inter- EU trade, but also significant developing nation growth. Re-emergence of USA as a significant exporter as corn prices have declined. Growth in EU exports with closure of Russian market, removal of EU quotas.

7 Dairy market globalisation Milk prices in southern Australia increasingly linked to global prices Drinking milk market less export linked, although affected by export downturns and pricing by major retailers. Surge in demand post GFC lifted prices and made USA, EU export competitive

8 Commodity price volatility increases as markets deregulated

9 Pre-2000: Average annual price volatility 9.2% Post 2000: Average annual price volatility 13%

10 Strategic changes Global growth in dairy consumption Growth predominantly in emerging developing nations as middle class consumer population emerges. International dairy trade experiencing rapid growth, including growing exports from developing nations Australian dairy industry increasingly linked in to international dairy markets, and associated price volatility

11 A changing business environment Changes at the farm level Future opportunities

12 Consolidation of dairy farming sector Greater consolidation in Nthn, Western regions

13 Dairy productivity growth

14 Farm assets Average asset value of an Australian dairy farm now $4.5 million. Water entitlements represents an additional asset value. Approximately 80% of value is land and fixtures. Substantial growth has occurred since 2000

15 Dairy farm profitability Average long term operating returns approximately 2.1% per annum Average long-term rate of capital appreciation approximately 1.6% per annum Best 25% experience much better returns, but volatility an important challenge.

16 Ageing farmers? Not really! 30% 40% 25% 20% 35% 30% 25% 15% 10% 5% Total workforce Crop farmers Mixed farmers Livestock farmers 20% 15% 10% 5% Crop farmers CEOs GMs 0% 0% 100 years years years years years years years years years years 0-9 years 100 years years years years years years years years years years 0-9 years

17 Service providers As farm sizes have increased, reliance on service providers has also grown. Increase in payments to sharefarmers a reflection of changing business models. Increased use of contractors for cropping, fodder etc.

18 Index of volatility - Australian economy Risky businesses Relative volatility of Australian economic sectors ($) Agriculture Finance and insurance Construction Mining IT, Media and telecommunications Wholesale trade Administrative services Accommodation and food services Professional services Retail trade Manufacturing Rental and real estate services Transport Education and training Public administration Electricity, gas and waste Health care Relative volatility of agriculture sub-sectors ($) Grains and oilseeds Beef Sugar Sheepmeats Dairy Wool Pork Vegetables Poultry Fruit and nuts

19 Factors impacting on dairy farm risk Factor Risk impact Increased trade-exposure, and volatility in international markets +++ Adoption of feed-based dairy production systems ++ Incentives to encourage flatter milk supply curves ++ Supermarket home brand contracts - Complex farmgate milk pricing systems + Growth in size of dairy farms with increased debt finance and capital investment + Enterprise specialisation + Volatility of cost of farm inputs (electricity, water, grain) ++

20 Dairy farm changes Increasing scale of dairy farms, driven by productivity growth and competition. Growth in value of farm assets under management, but financial returns have remained stagnant Increased farm reliance on professional and technical service providers. Growth in alternative business structures.

21 A changing business environment Changes at the farm level Future opportunities

22 Labour force changes Owner/operators and family contributing a declining share of total labour inputs in Australian agriculture. Employed workers contributing an increased share of labour inputs Trend is likely to also be evident in dairy. 22

23 Growing demand for off-farm services Roles associated with advertisements seeking agricultural graduates,

24 Concluding points Dairy sector has undergone significant change due to globalisation and consolidation, and change is continuing. As farms reduce in number and consolidate, growth occurring in demand for onfarm services, contracting, and employment of farm labour. Significant growth also occurring in off-farm service sector, eg finance, agrichemicals, planning and advisory services. Growth also occurring in alternative farm business structures. Dairy farm ownership is no longer a prerequisite for a career in the dairy sector.

25