Dairy industry laps up China trade agreement

DAIRY farmers are expected to be the big winners from the China-Australia Free Trade Agreement (FTA) signed last week. The FTA will see dairy tariffs, which can be as high as 20 per cent, phased out within four to eleven years.

The managing director of dairy giant Devondale Murray Goulburn (MG), Gary Helou, said a FTA with China was a vital step for the future of MG’s more than 2,500 dairy farmer supplier/shareholders.

MG’s exports accounted for more than 51 per cent of its revenue last financial year, with MG exporting A$1.5 billion – including more than A$200 million to China and Hong Kong – in the form of infant nutrition, milk powder, cheese and drinking milk.

“China is already the world’s largest dairy import market, last year importing 2.2 million tonnes, an increase of over 40 per cent on the previous year. It is forecast that China dairy demand and dairy imports will continue to grow,” said Mr Helou.

“Chinese customers and consumers trust the quality and safety of Australian dairy products, and increasingly seek it as a premium choice in both the ingredients and grocery dairy foods. Therefore it is vital that Australia has excellent and competitive access to the growing and strategic China market.”

Local MG supplier Ray Argento, who milks a herd of about 180 cows at Toora, said on first glance the FTA looks very promising, but he has not yet had a chance to digest its full import. “It will be a number of years before we see all the benefits,” he cautioned. “But it looks like it will provide access to one of the world’s largest markets. On the other hand, we can also expect to see greater investment from the Chinese in Australian dairy farms.”

Helen Jones, who farms with husband Kevin between Foster and Toora, said that she was hopeful the trade agreement would be good for the industry in the long term.

The long term is what Daniel Knee has in mind. Only last year he and wife Cindy took over the dairy farm long run by his parents, Bruce and Rae. He’s now in charge of nearly 400 milkers at Toora North. “It will be a few years before we see the benefits, but a free trade agreement is good for the industry,” he said. “It’s definitely a positive and gives me more confidence. It’s a great opportunity for farmers. It should put us on a par with New Zealand, which is a good thing.”

Whilst MG and the industry are yet to review the full detail of the FTA, Mr Helou said the deal seemed to tick all the boxes sought in a good FTA.

“The first objective in this FTA was to begin to redress the disparity between Australia and New Zealand dairy trade to China. Second was to achieve a pathway to total free trade providing a competitive advantage and protecting Australia’s long-term competitiveness in China. It seems these objectives have been delivered.”

Mr Helou said that MG has plans to grow in China.

“MG is already investing in its manufacturing footprint to provide world class dairy foods to China and south-east Asian consumers. The China FTA will further cement MG as a first choice dairy foods supplier to the China market and this will support higher farmgate returns to our dairy farmer supplier/shareholders,” he said.

Fonterra Australia also welcomed the FTA and applauded the Australian and Chinese Governments and industry for making it happen.

Fonterra Australia Managing Director Judith Swales said expanding market access was critically important to the future profitability of the entire Australian dairy supply chain.

“This is a good time to be in dairy. The FTA will be a game changer for Australian dairy,” she predicted.

“The FTA presents all sorts of opportunities. For our Australian farmers, it will give them the confidence to invest in their businesses and confidence that the whole industry is supporting them in providing access to our biggest export market.

“It will bring our milk closer to the Chinese consumer – a market that represents 30 per cent of global dairy imports and is the world’s largest dairy importing country. We know that more milk is required to satisfy this demand and that all products in all forms are possible.

“All this makes Fonterra Australia well placed to increase high-value specialty exports to China and benefit from the FTA.”


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