By GREG ANSLEY
CANBERRA - Australia and New Zealand are expected to clash more fiercely in Asian dairy markets as rising production and falling real world prices force the two countries to compete in one of the few global bright spots.
The Australian Bureau of Agricultural and Resources Economics (Abare) said
this week that despite recent gains in world prices across most products, longer-term prospects were less optimistic.
In its analysis of the world dairy market at the annual Outlook commodity forecasting conference, Abare said higher production and limited growth in demand would soften nominal prices.
In real terms, the situation was expected to be worse, with inflation-adjusted prices for all dairy products projected to fall by up to 6 per cent over the next six years.
Abare said this indicated that at least part of the world dairy industry would continue to lift output through productivity gains such as higher milk yield per cow.
This would especially be the case in such non-subsidising countries as New Zealand.
This would focus greater attention on Southeast Asia, where growth in demand was expected to be the strongest of the developing country markets.
Southeast Asian demand was being fuelled by growing consumer interest in dairy products, improved packaging and longer shelf life.
But Australia and New Zealand were both aiming at the market.
Abare said Australia's major challenge was to keep its exports competitive, especially against New Zealand.
Growth in New Zealand's key markets of Europe and the US was limited by tariff rate quotas, forcing it to seek expansion elsewhere.
"In particular, New Zealand will seek an increased presence in some of Australia's major markets, such as Southeast Asia and Japan," Abare said.
