Australian Dairy Industry Analysis. Includes The Effect Of Deregulation Of The Industry

2327 words - 9 pages

1 IntroductionThe Australian Dairy Industry consists of five main segments. These being farming, manufacturing, processing, distribution and vending. This analysis will examine these stages/sectors of the industry by covering five broad areas. These topics include the structure of the industry, the production process and production costs, its international involvement, government policies in relation to the Australian dairy industry and finally the industries value to the Australian economy. The Australian dairy industry can be described as being an oligopoly as a large proportion of its characteristics are represented by that of a perfect oligopoly market. Dairy products are produced in several regions across Australia. These include south-east Queensland, Western Australia and eastern parts of New South Wales. 'Victoria produces 60% of Australia's gross dairy production' (Cameron, 1974, 244).In the past few years, deregulation has been highly debated as to whether it has had positive effects or negative influences on the dairy market. The areas listed above will be analysed alongside specific sectors of this analysis which will establish facts and draw conclusions as to whether a deregulated, highly competitive dairy industry is more appropriate than a controlled, secure industry.2 Structure2.1 Size of IndustryThe dairy industry is the third largest rural industry in Australia, behind beef and wheat. It is a major rural employer and one of the leading rural industries in terms of value adding. Australia's production has increased both in volume and value terms over the past ten years. 'Gross farmgate value, the value of the industry immediately following the production process, has increased to approximately 3.3 billion Australian dollars. The Gross farmgate value increases almost 60% to 7.5 billion Australian dollars when the original products are turned into a diverse range of dairy goods which is the value of the ex-factory output.' (The Australian Bureau of Statistics,2000)2.2 Market Share2.2.1 Control of priceThe retail sales for the large volume dairy products such as milk and yoghurt are controlled by the two major retailers, Coles and Woolworths. These two companies call tenders for supply normally on an annual basis and because the volume is so large the tender is very competitive and thus very price sensitive. Accordingly, milk groups such as National Foods have "adopted a strategic focus to drive growth which concentrates on impulse beverages - drinks bought on impulse in shops - and gourmet food. It is on these products that there is less price competition and accordingly, premium prices with premium profits are realised." (Sydney Morning Herald, 30/09/2003)2.2.2 Anti-competitive natureThrough the deregulation of the Australian dairy industry, there is now a free, transparent, price sensitive, competitive market for all dairy products. This has caused individual producers to look for specialist products so as to provide larger...

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