Milk powder market failure

By Country News on December 03, 2015

Who would have thought Australia would be experiencing food rationing in 2015?

And who would have speculated that, in Australia’s largest dairy production region — the Goulburn Valley — milk powder would be rationed by our big retailers?

The apparent shortages that have arisen in infant milk powder represent a disappointing market failure which must be of concern to our dairy farmers.

A large percentage of Goulburn Valley milk production is destined for the milk powder market and it has become clear in recent months that the production system is not responding to market signals.

Either that, or retailers are not adapting to the new demand and have their own agenda in terms of managing supply.

Various issues have been blamed for the shortage: a peak in demand caused by special Chinese celebration days, individual entrepreneurs ‘mailing’ boxes of powder directly to China, opportunists selling it for inflated prices.

Most of the issues are related to demand from China, and anyone interested in the dairy industry would know that the potential demand for our dairy products has been well docmented in recent years.

One of the most disappointing aspects of this market development is that it is occurring with an important food item, almost an essential one for mothers with newborn babies who cannot breastfeed.

Our dairy industry leaders should be listening to the complaints from mothers who have been irritated and inconvenienced by this shortage of a product which is not that perishable.

And the industry should be turning over heaven and earth to correct this shortage to maintain faith with its customers.

This is not Russia, where food shortages are an expected way of life.

We are living in a free market economy where demand should be driving supply, and our farmers can benefit from high demand, by getting better prices.

For years dairy farmers have been told that China is a huge potential market for our much sought-after product.

Now it looks as though the demand has arrived and we are missing the boat.

—Geoff Adams

Country News editor

By Country News on December 03, 2015

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