DAIRY OPPORTUNITIES IN SOUTH AUSTRALIA
2
PREMIUM FOOD & WINE FROM OUR CLEAN ENVIRONMENT
Agriculture is South Australia’s most significant industry worth over $16 billion
annually, supplying premium food and wine to the world.
20% of Australia’s grain produce 7 million tonne average grain production per year with 80% exported
to China, Asia and Middle East
62% of Australia’s wine exports Premium wine growing regions with exports to UK, North America
and emerging markets in China and Asia
Premium livestock producer Beef, lamb, dairy, pigs, poultry, wool – exports to Japan, China, US,
UK, Europe, other Asia
Australia’s premium seafood Tuna, rock lobster, abalone, prawns and kingfish from pristine
Southern Ocean exporting to Japan, Hong Kong and other Asia.
Leading horticulture production Potatoes, tomatoes, capsicums, mushrooms, almonds, citrus –
including world leading greenhouse and water technologies
Australia’s first commercial forestry 200,000 hectares of softwood and hardwood plantations – exports to
Japan and others
World leading R&D and education University of Adelaide/Waite Institute, South Australian Research &
Development Institute, Australian Wine Research Institute
3
DAIRY ADVANTAGE AND OPPORTUNITY IN SOUTH AUSTRALIA
Premium opportunity to increase dairy production and export from an environment
of natural advantages.
Dairy land availability Capacity to grow the industry multiple times with conversion of prime land
Export logistics advantages Close proximity to high growth markets of China and Asia
Potential for growth in processing Fresh milk, powder, UHT, cheese, other
Internationally recognised food safety record Food safety standards ensure quality, reliability and differentiation
Source: PIRSA, ABARES, Dairy SA, Dairy Australia
World leading dairy yields 20% higher than rest of Australia, 2-3 times higher than the global average
Global Whole Milk Powder Consumption (Kt)
Source: FAO, OECD, International Dairy Federation 4
ASIAN DEMAND GROWTH DRIVING OPPORTUNITY
The continued
growth in
population
and living
standards in
China and
Asia will
underpin
growth for
high protein
foods
including dairy
0
50
100
150
200
250
300
350
400
450
500
2003 2008 2013 2018
Whole Milk Powder (WMP) Skim Milk Powder (SMP)
China’s Growing Dairy Imports (Kt)
4,000
4,500
5,000
5,500
6,000
2012 2017 2022
WMP - Forecast Consumption
WMP 2010 - 12 Average Consumption
Global Whole Milk Powder Consumption (Kt)
Supply
Gap
3,000
3,500
4,000
4,500
5,000
2012 2017 2022
SMP - Forecast Consumption
SMP 2010 - 12 Average Consumption
Supply
Gap
Global Skim Milk Powder Consumption (Kt)
China’s Growing Dairy Imports (Kt)
Global Skim Milk Powder Consumption (Kt)
Growth in world demand for dairy products is outstripping supply leading to an
impending supply gap/growth. South Australia has a leading capability and
advantage to contribute increased production.
AUSTRALIA POSITIONED TO SUPPLY CHINA AND ASIA
Global Dairy Exports (milk equivalent basis)
New Zealand
European Union
USA
Australia
Belarus
Argentina
Saudi Arabia
Rest of world
Global Dairy Imports
(milk equivalent basis)
China
Russian Federation
Saudi Arabia
Mexico
Algeria
Venezuela
Indonesia
Egypt
USA
Japan
Rest of world
Source: FAO, OECD, International Dairy Federation
Global Dairy Imports
(milk equivalent basis)
Global Dairy Exports (milk equivalent basis)
5
Source: PIRSA, International Dairy Federation, Dairy SA, Dairy Australia, Dairy NZ 6
WORLD LEADING DAIRY IN SOUTH AUSTRALIA
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
South Australia Australia New Zealand Global
Production Per Cow (litres/year)
South Australia Australia
South
East
Central &
Mid North Total Total
Milk Production
(million litres) 350 216 566 9,200
Cows
(thousand) 45 39 85 1,650
Farms 110 158 268 6,398
Production / Cow
(litres/year) 7,760 5,538 6,684 5,525
South Australia
South East Central & Mid
North
Total
Current Hectares
(thousand) 31 71 107
Potential Hectares
(thousand) 300 12 312
Total 331 83 419
Production Per Cow (litres/year)
South Australia is the high yielding niche
of Australian dairy with significant
capacity to grow in regions of natural
advantages.
Milk production of nearly 7,000 litres per cow per year is 20% higher than the rest
of Australia, 70% higher than New Zealand and 2-3 times higher than the global
average.
This premium yield reflects South Australia’s natural advantages in genetics,
climate, irrigation and feed.
Genetics
Leading Holstein Friesian
and other breeding lines
developed from long term
world class genetics
programmes.
Prime dairy regions with
ideal climates of
28”- 33”average annual
rainfalls and average
temperatures of
16˚C – 25˚C.
Prime dairy regions with
natural underground water
irrigations including the
South East Unconfined
Aquifer / Otway Basin and
River Murray irrigation and
aquifer system.
Climate Irrigation
Prime dairy regions grow
leading feed stocks including
natural perennial rye grass,
lucerne, wheat, barley, peas
and other hays.
Feed
NATURAL ADVANTAGES GENERATING PREMIUM YIELDS
Source: PIRSA, International Dairy Federation, Dairy SA, Dairy Australia, Dairy NZ 7
Source: PIRSA, Dairy SA, Dairy Australia, Dairy NZ 8
SOUTH EAST REGION EXPANSION OPPORTUNITY
The South East dairy region has the capacity to
increase production by up to 1 billion litres from a
base of 350 million litres via the conversion of
prime farm land to dairy.
Regional Advantages
High production yields
Suitable climate and rainfall
Irrigation availability
Feed and fodder availability
Processing facilities available and
opportunity for more
Strategically located between
Adelaide and Melbourne
This area is the state’s
highest dairy yielding with
nearly 8,000 litres per cow
per year which is 40%
higher than the Australian
average.
Existing industry skills, technology
and management
Opportunity exists for
further highly suitable land
to be converted into dairy
in this region which is
currently being used for
lower returning agricultural
operations.
South East Region
Illustrative example to develop a 1,000 cow dairy in
the South East on 450ha, producing 7.5 million
litres of milk per year.
Capital Cost $13 million
(Comprising land, water and
infrastructure $6m, plant & equipment
$5m, cow herd $2m)*
Revenue $3.5 million per annum
EBITDA $1.3 million per annum
EBIT $1 million per annum
Return on
Investment
7%
Expected
Capital Gain on
Land
4% - 5% per annum
DAIRY FARM LAND OPPORTUNITIES
Central Region
Opportunity for dairy production to double in the River
Murray Swamps / Central region.
Currently 4,230ha under production providing 100 million
litres of milk. 4,000ha of additional suitable land has
been identified with irrigation capability.
9
* Assumes quality land, irrigation, feed stocks and robotic dairy technology.
Source: PIRSA Food Scorecard 10
PROCESSING AND EXPORT OPPORTUNITIES
Significant opportunity exists to process
and export more South Australian dairy
products (fresh milk, powder, UHT, cheese,
other) with the support of local farmers
seeking to further their industry.
Currently only 2%
of milk production is
processed for direct
export from South
Australia.
Dairy Processing
Dairy Exports
34%
2% 64%
Dairy Processing
Domestic
Direct Export
Interstate
3%
88%
1% 8%
Dairy Exports
Milk
Cheese
Butter
Other
Source: Searates.com
ASIAN EXPORT FREIGHT ADVANTAGE
Region
Distance to
Shanghai
(km)
Time to
Shanghai
(days)
South Australia 9,900 24
New Zealand 10,000 25
United States 10,500 26
Europe 19,500 40
11
South Australia has a natural logistical advantage for exports into China and Asia.
Containerised shipping time to Shanghai is marginally less than New Zealand and
the United States and significantly less than ports in Europe.
12
OPPORTUNITY TO DEVELOP UHT MILK PROCESSING
Picture courtesy GEA Process Engineering
Capital Cost $25 million*
Revenue $56.1 million per annum
EBITDA $5.8 million per annum
EBIT $4.2 million per annum
Return on Investment 17%
Capacity 55 million litres
Production Rate 10,000 litres per hour
Operational 20 hours/day
Plant Utilisation 90%
UHT Price (AUD) $1.00/litre
Milk Solid Price
(farm gate)
$5.70/kg
* Includes working capital
Illustrative example to develop a 55 million litre capacity UHT milk processing
plant.
Opportunity exists to double the value of purchased milk and yield premium
returns with a relatively small capital outlay and operating costs.
OPPORTUNITY TO DEVELOP MILK POWDER PROCESSING
Picture courtesy GEA Process Engineering
Capital Cost $70 million*
Revenue $117.7 million
EBITDA $8.1 million per annum
EBIT $3.3 million per annum
Return on Investment 5%
13
Capacity 30,000 tonne
Milk Processed 217 million litres
Production Rate 5 tonnes per hour
Operational 20 hours/day
Plant Utilisation 90%
WMP Price (AUD) $4,211/tonne
Milk Solid Price
(farm gate)
$5.70/kg
* Includes working capital
Illustrative example to develop a 30,000 tonne capacity milk powder processing
plant.
Opportunity exists to target key export markets, particularly China, where there is
a significant demand and price premium for milk powder products.
14
Industry Support
South Australian Dairy
organisations and members
actively support and develop the
industry in South Australia.
Foreign investment is welcomed
as a key mechanism to support
industry growth.
Key industry organisations:
• South Australian Dairy
Farmers’ Association
• Dairy SA
• Dairy Australia
• Dairy Authority of South
Australia
• Primary Producers SA
Government Support
The South Australian
Government supports investors
throughout the investment
process via a Case
Management approach.
Government agencies involved
include:
• Primary Industries and
Regions South Australia
• Department for State
Development
Low Costs
Ranked one of the lowest cost
states in Australia for business
and living.
Adelaide is also ranked the most
liveable and safest city in
Australia, and the 5th most
liveable city in the world.
Average wages are 10% lower
than eastern states, and 20%
lower than WA.
Infrastructure
Adelaide and South Australia
are at the centre of Australia’s
air, road and rail transport links.
Strategic proximity to Asia
supported with a number of
ports, including Port Adelaide.
Food Safety Standards and Export Regulations
Food Safety Standards
South Australia is recognised internationally for the quality of food safety
standards and processes, ensuring strong differentiation in international
markets.
Producers and processors in South Australia adhere to the national
guidelines under Food Standards Australia & New Zealand (Primary
Production and Processing Standard for Dairy Products).
Export Regulations
Exports are controlled by the dairy program within the Australian
Department of Agriculture. Process of registration is by way of
application to Dairy Authority of South Australia (DASA). If food
safety plan and systems are in place, accreditation is relatively fast.
South Australia has a range of initiatives and advantages to support new
investment into the state including low costs and existing infrastructure in key
dairy regions.
SUPPORT TO INVEST IN SOUTH AUSTRALIAN DAIRY
Industry Highlights
• 7% of Australia’s population
• 81% of Australia’s uranium reserves
• 69% of Australia’s copper resources
• 62% of Australia’s wine exports
• 38% of Australia’s wind power capacity
• 32% of Australia’s defence industry
• 20% of Australia’s grain production
• Largest most mature onshore hydrocarbon province
• World class education, R&D and health systems
• Adelaide ranked 5th most liveable city in the world
THE STATE OF SOUTH AUSTRALIA AT A GLANCE
15 Source: EIU: A Summary of Liveability Ranking and Overview August 2012
KEY LOCATION FOR SUSTAINABLE BUSINESS
DIVERSE INDUSTRY BASE
Minerals &
Energy Agriculture
Renewable
Energy
Advanced
Manufacturing Defence Education Health
State population
Adelaide population
1.6 million 1.2 million
CONTACT DETAILS
Invest in South Australia
The Conservatory
131-139 Grenfell Street
Adelaide 5000
South Australia
T: +61 8 8303 2419
www.invest.sa.gov.au
Primary Industries and Regions South Australia
Level 14, Grenfell Centre
25 Grenfell Street
Adelaide 5000
South Australia
T: +61 8 8226 0900
www.pir.sa.gov.au
Published July 2014
The information contained in this presentation has been compiled by the Department for State Development
(DSD) and Primary Industries & Regions South Australia (PIRSA) and originates from a variety of sources.
Although all reasonable care has been taken in the preparation and compilation of the information, it has been
provided in good faith for general information only and does not purport to be professional advice. No warranty,
express or implied, is given as to the completeness, correctness, accuracy, reliability or currency of the materials.
Facts, illustrations and information should not be relied upon and readers should seek their own professional
advice and due diligence prior to making any investment decision.
DSD, PIRSA and the Crown in the right of the State of South Australia does not accept responsibility for and will
not be held liable to any recipient of the information for any loss or damage however caused (including
negligence) which may be directly or indirectly suffered as a consequence of use of these materials. DSD and
PIRSA reserves the right to update, amend or supplement the information from time to time at its discretion.
This document has been prepared with the assistance of Rural Solutions SA and the South Australian Dairy
Farmers Association Inc.
Justin Ross
Director
Agriculture, Food and Wine Primary Industries and Regions SA
Telephone +61 8 8226 8157
Email: [email protected]
Michael Blake
Meat and Livestock Account Manager
Agriculture, Food and Wine Primary Industries and Regions SA
Telephone +61 8 8226 0714
Email: [email protected]
Developed in association
with the South Australian
Dairyfarmers Association Inc
David Basham
President South Australian Dairyfarmers
Association Inc
Telephone +61 8 8293 2399
Email: [email protected]
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