Australia no longer a net exporter of cheese

The value of cheese imports matches exports, for the first time in the Australian dairy industry’s history.

Australia has imported as much cheese as it exports for the first time.

Australia is no longer a net exporter of cheese to the world.

While cheese is Australia’s number one dairy export, Dairy Australia records show that for the first time the value of the nation’s exports has been matched by imports.

DA’s records show supermarkets’ and the food services sector’s demand for cheap New Zealand, US and European cheese pushed imports up from $843 million in 2022 to $1 billion in 2023, while Australian exports stagnated at $1bn.

Value of Australian cheese exports versus imports

Back in 2001, Australian cheese exports totalled $984m, with imports sitting at just $212m.

Australian Dairy Farmers president Ben Bennett said it was a case of “down, down, down”, with the food services sector importing huge volumes of frozen mozzarella from the US for the pizza trade.

As previously reported at least a dozen smaller dairy processors have gone under, been sold or faced crippling losses during the past 18 months, as costs bite and imports surge.

But even Australia’s big three processors - Bega Cheese, Saputo and Fonterra – are struggling with the high cost of milk, labour and energy.

Industry analysts say surging import competition has now left local processors with a glut of cheese sitting in storage and millions of dollars worth of excess processing capacity.

Bega Cheese financials show its inventory levels have grown from $317m on June 30, 2022 to $428m at the same time last year and $435m by December 30, but just how much of this is cheese remains unknown.

Saputo has implemented a “network optimisation activities in Australia (that) will result in

eleven plants being consolidated into six” and Fonterra Australia recently announced its half-year earnings before interest and tax had slumped 43 per cent to NZ$42m (A$39m).

But even with this rationalisation, competition is about to get even tougher.

Global cheese prices are sitting at about $6100 a tonne compared to $7800/t at the start of last year and almost $10,000/t in early 2022.

At the same time Australian farmers are pouring more milk into factories in response to farmgate prices averaging about $9.40 a kilogram milk solids.

With nowhere else to go Australian manufacturers are simply turning more milk into cheese, with the US Department of Agriculture’s 2024 outlook forecasting Australia will “increase cheese production by 5 per cent to 445,000 tons (sic) in 2024”.

The situation could get far worse, with Australian processors in the midst of trying to renegotiate contracts with their most lucrative customer Japan.

But Dairy Australia head of economics John Droppert said over time the premium Australian processors could extract from Japan was “becoming thinner and thinner”.