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Cheesemakers bank on export market amid volatile conditions

Global growth opportunities for the Australian dairy sector have been highlighted in a recent report by Rabobank.

Despite heightened volatility and
uncertainty in the global trade environment, there’s strong demand for cheese products in Asia that spells opportunity for Australia.

Rabobank senior dairy analyst and report author Michael Harvey said that cheese is an important driver of dairy export returns, with about 11 per cent of cheese exported to global countries.

“These heightened risks include broad macroeconomic headwinds, with a slowing global economy, and a sluggish recovery, which could negatively impact consumer spending,” said Harvey in a statement.

This means Australian exporters aren’t immune to the trade risk with the disruption to the Chinese market. Though cheese trade hasn’t been impacted significantly yet, there are still lingering trade tension risks that could worsen in the future.

He said that exporters are dealing with an increasingly volatile trade environment due to mounting tensions between the US and China as well as retaliatory tariffs between the US and EU, and Brexit, “which have the potential to disrupt over 500,000 metric tonnes of internal EU cheese exports to the UK”.

Harvey said in Australia over one third (around 36 per cent) of milk is used to produce cheese which affects the farmgate milk price in the country.

“Over the past five years, over one million metric tonnes of new cheese production capacity has come on line globally, and, while that growth has been necessary, we are entering a period with potential excess capacity,” he said.

He sees China as a top country to export cheese products, with Japan coming in second.

“While South Korea also remains integral to the global cheese balance. And in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, their combined import volume of cheese is forecast to reach around 190,000 metric tonnes in the next five years,” he said.

He remains confident on Australia’s capability to export cheese to Asia as due to its major investments in the region.

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