Infant formula sales have grown by 30 per cent in the past year according to Dairy Australia’s new Situation and Outlook report released today.

 

The growth in formula sales is the highlight of the report which otherwise reflects an industry continuing to battle low prices due to the international oversupply of milk which plagued dairy farmers in 2015.

 

Milk prices remain steady

 

According to Dairy Australia, Australia’s milk sales remained steady increasing just 0.4 per cent over the 12 months to December 2015. The majority of extra product sold was UHT. Sales volumes for UHT product rose 2.1 per cent to a total of AUD$192 million litres. Category value declined 1.1 per cent due to declining per litre pricing which fell 3.1 per cent to an average AUD$1.31.

 

The report revealed Australian consumers are ditching low-fat milk in favour of full-cream with sales of full cream fresh white milk increasing by 5.1 per cent but modified milk down 8.8 per cent. Private label milk options continued to gain market share in the fresh white milk category representing 63.4 per cent of sales.

 

Australians lose interest in smooth and creamed cheese

 

Cheese sales also remained steady for the 12 months ending October 2015. Smooth and creamed cheese sales dropped 6.4 per cent and sliced cheese sales fell 1.8 per cent. Block and snacking cheese performed better with a slight 0.7 per cent and 3.7 per cent, respectively, sales growth.

 

Dairy spreads was one of the better dairy performers in the 12 months prior to the end of December 2015 with the product category growing 4.7 per cent in volume and 6.1 per cent in value.

 

Costs of production taking toll

 

The report states that input costs such as water and hay for cattle are continuing to add challenges to Australian dairy farmers. Dairy Australia said international weather is also taking its toll.

 

“A tough international market and challenging weather are driving a southern hemisphere supply response, but northern hemisphere milk production growth continues,” the report states.

 

“The US remains focused on domestic markets, but Europe continues to aggressively in grow export market share,” the report said.

 

Chinese demand quietens

 

Dairy Australia said Chinese demand is currently subdued.

 

“Global demand growth continues to largely come from price sensitive countries. While demand from Greater China and Russia remains subdued, Japan continues to see strong growth, as does Southeast Asia,” the report said.