There is a good reason.
“At a domestic level, these high farmgate prices, combined with other drivers of food inflation, have seen strong rises in the retail price of many dairy products, such as butter, cheese and yoghurt.”
In Australia, some dairy products such as butter, cheese and yoghurt may well get more expensive in coming months.
These products sit at the heart of a $4.4 billion a year industry producing 8.8 billion litres of milk, employing 46,000 people and spanning trade relationships and evolving consumer trends across several continents.
But what are the global factors impacting prices?
A luxury item?
On a broad level, global dairy product prices continue to remain relatively low, as Chinese demand remains subdued. As a result of this reduced demand, impacted by both COVID and tight economic conditions, global dairy products are currently in relative oversupply.
Globally, dairy prices have continued to fall in recent months.
The Global Dairy Trade (GDT) Index has suffered from the major reduction of China’s participation in the market, as Chinese consumers continue reduce their consumption of dairy products through tough economic times.
Due to its sheer size China is the world’s largest dairy market, importing more than 3,400,000 tonnes of product in 2021/22.
To a degree, this process highlights the greater vulnerability of a market such as China, where consumption of dairy products is relatively new compared with some other major markets.
While dairy is a cornerstone of the Australian diet, it has until recently been considered somewhat of a luxury in China. As a result, where these products are more discretionary to consumers, consumption is more likely to drop in economic downturns.
As a result of China’s downturn in purchasing, the GDT has fallen to almost 20 per cent below its five-year average levels.
The global dairy product market is currently experiencing a period of oversupply and given the time this may take to fall, any recovery in global dairy prices, even when consumers begin to increase their purchases, is likely to be a long-term one.