The Australian dairy industry has slipped from fourth to fifth place on the list of world dairy exporters.
Australia ranks behind New Zealand, the European Union, the United States and, for the first time this year, the United Kingdom.
Australian dairy exports were worth $3.7 billion in 2022-23, down from $3.8 billion the previous year, the Australian Dairy Industry In Focus 2023 report released on November 15 has revealed.
But Australia remained a significant exporter of dairy products, despite accounting for about 1 per cent of the world's estimated milk production, Dairy Australia industry analyst Isabel Dando said.
Australia's share of world exports fell from 4.8pc in 2021-22 to 4.7pc in 2022-23, while the UK's share grew from 4.5pc in 2021-22 to 5.3pc in 2022-23.
Australia now exports 30pc of the milk it produced, down from about 50pc two decades ago,
"The share of milk exported has contracted over time due to population growth and an overall decline in milk production," Ms Dando said.
The total volume exported in 2022-23 was 698,944, down 16pc from the 836,252 tonnes exported the previous year.
At the same time Australia imported more dairy products.
"Imports increased significantly between 2021-22 and 2022-23, especially for butter and cheese," Ms Dando said.
The total volume of dairy imported in 2022-23 was 343,556 tonnes, up 17pc from the 292,787 tonnes the previous year.
In value, imports were worth $2.7 billion, up 30pc from $2.1 billion the previous year.
Ms Dando said Australia in milk equivalent terms was a net importer of milk fats but a net exporter of milk proteins.
China remained the biggest export market in 2022-23, although volumes exported there declined.
Ms Dando said Australia was still a key agricultural industry.
It was the nation's third largest rural industry, generating close to $6.1 billion in farmgate value last financial year.
The report also revealed that Australia's milk production and number of dairy farms continued to fall.
The national milk pool fell 5pc, ending the season at 8.1 billion litres.
"Labour challenges across the country led to many farmers choosing to alter their businesses by milking smaller herds or diversifying into beef," Ms Dando said.
"Most dairying regions were also flood-affected during the season, with some more severely impacted than others."
The number of dairy farms was down 6pc to 4163 farms.
But the average herd size continued to the long-term trend, lifting to 305 cows from 303 cows, but significantly higher than the 93-cow average in 1985.
Ms Dando said the vast majority of farmers reported that they made an operating profit in 2022-23, with profitability at an all-time high in some regions.
Strong competition for milk among processors saw high farmgate milk prices, which averaged $9.80 a kilogram milk solids.
Ms Dando said dairy foods remained a staple in most Australian households.
Per capita consumption of cheese, butter and yoghurt increased in 2022-23 while drinking milk fell slightly to 90 litres.
Although drinking milk consumption had declined marginally in recent years, Australian consumption of drinking milk was high compared with other developed countries.
"Australians are also returning to full cream white milk, with the proportion of sales of low-fat and skim milks declining," she said.
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