The findings are part of an interim report by the Productivity Commission of Australia on the cost of doing business in the dairy product manufacturing industry.
The report is part of an ongoing discussion on possible reforms to government policy that will reduce costs faced by dairy product manufacturers.
Source: Productivity Commission Interim Report – June 2014
At a processor level, the cost of raw milk is estimated to take up to 25-78% of revenue. These vary mainly depending on the end product made. Studies find that transport and production costs between processing fresh milk and milk powders make up the bulk of the difference.
Overall farmgate milk prices in Australia are lower than in NZ, US and EU.
On cost disadvantages, Australian processors are found to face higher labour and energy costs. The report suggests dismantling policies that provide distortionary subsidies and a further review of workplace relations as possible policy interventions.