Buresu of Agricultural Economicas, Canberra

Structural Adjustment in the Australian Dairy Proc-ing Sector

INDUSTRY ECONOMICS MONOGRAPH No. 7 7

Australian Oovernment Publiehing Smrvice Canberra 1a77

@ COMMONWEALTH OF AUSTRALIA ISBN 0642 02942 3

Printed bp Canberra Reprographic Printers, E yshwick A.C.T.

FOREWORD

The Industr ies Assistance Commission i n its repor t on Dairy Industry Marketing Arrangements noted +he s ca r c i t y of information on the dairy processing sec tor of the industry . The Commission pointed out t h a t the implementation of recommended changes t o t he marketing arrangements would have important implications f o r t he processing sec tor but t h a t , with the l imi ted information ava i lab le t o t he Commission, it was not poss ible to ascer ta in t he f u l l impact of t he changes on the processing sec tor . The Commission saw the question of adjustment within t he processing sec tor a s being important and wished t o be ab le t o i den t i fy t he l i k e l y industry adjustment problems i n order t o recommend appropriate solut ions . The Commission therefore recommended t h a t the BM undertake a de ta i l ed study of the processing s ec to r of t he dairy industry as soon as possible.

The Australian Agricultural Council i n i ts del iberat ions on t h e IAC Report accepted t he need f o r a study a s proposed by t he Commission and agreed t h a t t h i s would provide v i t a l data f o r an examination of t h e adjustment implications f o r the processing s ec to r of implementing t h e proposed new marketing arrangements. I n view of t he need f o r ea r ly decisions on t he I A C recommendations, t he M C requested t he Bureau t o undertake, a s a matter of urgency, a study of t he factory sector . The study was undertaken i n November 1976, and t he repor t was presented t o Council a t i t s meeting of 17 December 1976. Apart from minor amendments, t h i s repor t t o t he AAC i s published here.

The primary object ives of t h e BAE study were t o review t h e recent changes i n t h e physical s t r uc tu r e and. organisation of t he dairy processing sector . Since the time allowed f o r the co l lec t ion and analysis of the data and f o r t he preparation of the repor t was very shor t , t h e r e s u l t s can only be considered as t en t a t i ve and do not provide a f u l l y comprehensive descr ipt ion of t he e f f ec t s upon t h e economic pos i t ion of dai ry f ac to r i e s and of t he subs tan t ia l s t r uc tu r a l changes which have been occurring i n t h e s ec to r over the pas t s i x years.

Grateful acknowledgment is made to t h e S t a t e Departments of Agriculture, t he Austral ian Dairy Corporation, Commonwealth Dairy Produce Equalisation Committee, t he Commonwealth Department of Primary Industry and, i n pa r t i cu l a r , t o t h e many dairy f ac to r i e s which were contacted by the S t a t e Authori t ies, f o r the data presented i n t h i s repor t .

The study was undertaken by t h e Bureau's Livestock Production Research Section with overa l l supervision and preparation of t he repor t being t he respons ib i l i ty of D r M. V a n Der Veen.

N. D. HONAN Director

Bureau o f Agricultural Economics Cant! ~ r r a , A. C. T. March 1977

FOREWORD

SUMMARY

Introduction

Background

Scope of the Report

(v,

CONTENTS

Dairy Factory Number and Ownershi p

Size and Number of Butter and Cheese Factories in Equal isation

Butter Factories

Cheese Factories

Butter and Cheese Production by Ownership Type

Dairy Factory Adjustment

Factory F1 exi bi l i ty

Utilisation

Changes in Factory Output

Concl usi ons

Appendix

TabZe No.

TABLES

Page

Wholemilk Production and U t i l i s a t i on i n Butter and Cheese Production: Austral ia: 1969-70 t o 1975-76

Manufacture of Dairy Products: Austral ia: 1964-65 t o 1975-76

Disposal of k%olemilk: Austral ia: 1964-65 t o 1975-76

4 Number of Factories: By Omerslup Type: Austra l ia and Sta tes : 1970 and 1976 10

5 Dis t s ib i~ t ion of ETJLS&"F I~roducing Factories : By Production Passing T h r ~ u g h Equalisation: By S t a t e 1970-71 and 1975-76 16

6 Level of Austral ian Butter and Cheese Production Passing Through Equalisation: By Sta te : 1970-71 t o 1975-76 17

7 Average Level of Production of Butter and Cheese per Factory i n Equalisation: 1970-71 and 1975-76 18

8 Percentage Dis t r ibut ion of Butter Production: By Quar t i le of Factor ies i n Equalisation: 1970-71 and 1975-76 19

Table No.

9 Distribution of Cheese Producing Factories: By Production Passing Through Equalisation: By State-1970-71 and 1 975-76 21

10 Percentage Distribution of Cheese Production: By Quartile of Factories in Equalisation,: 1970-71 and 1975-76 22

11 Distribution of Australian Butter and Cheese Production Passing Through Equalisation: By Factory Ownership Type: 1970-71 and 1975-76 23

12 Dairy Factory Adjustment: Australia and States 1970 to 1976 25

13 Production of Manufacturing Milk: Selected States and Australia 33

14 Percentage Utilisation of Australian Dairy Factory Capacity: By State: 1974-75 and 1975-76 34

15 Distribution of Butter and Cheese Factories Open in 1975-76: By Change in Output of Butter and Cheese for Equalisation between 1970-71 and 1975-76 3 6

Dairy Factory Number and Ownership

. Rapid structuraZ changes have been occurring i n Lhe Austz.aZian da i ry processing sector; dairy factory numbers huve j'uZlen from 404 i n 1970 to 324 i n 1976,

Decreases i n factory numbers were concentrated among butter and by-product factories and cheese and by-product factories which decreased i n number by 61% and 37% re,speckl:o~i;;:j j%om 1970 to 1976.

. Factories cZassified as high value f a n q pmdz4c-k- increasecl' i n number from 55 t o 68 i n the same time period.

. The rate of decrease i n dairy factow nmbe;*s i n New Scvf;h WaZes, Queens Zand and i n Western AustraZia w a s shwer t h m ~ the nationaZ average.

. A Zarge proportion (79% i n 1976) of but-tera and by-p~oduc* factories i n AustraZia are owned by co-operatives; lzigh value fancy product pZants and town milk plants ,7ra pr;ma~~:Zy ~?;:91?ed b3 proprietaries.

. Co-operative factories decreased i n r,umber a t a faster ioate t h w ~ proprietary owned factories from 1970 to 1975.

Size and Number of Butter and Cheese Factories i n Equalisat ion

Butter factories

. Decreases i n the nwnber of factories producing butter occm~ed i n a22 but the Zargest tonnage categomj .

. A t the national Zeve Z, the number of factories produlrirq bukter decreased a t a faster rate than the decreose ir, t h ~ irmoimt of butter produced; the average ZeveZ of L.;rhter y ~ ~ ~ 2 ~ ~ c e & per factory increased 34% from 19 70- 71 to 29 75- 76.

. !The average ZeveZ of butter produced per fackny inorecsed subs tuntiaZZy i n Victoria, increased i n Western Az~tmZ.1:a nrzd Tasmania, remained the same i n Queens Zand and decmased i n N e w South WaZes and South AustraZia between 1970- 72 and 29 75-76.

. Victorian butter factories, i n 1975-76, on merage, p~o&~ced more than seven times the average amount produced by factownzes manufacturirg butter i n N e w South Wales, QuesmL~n.d and Ssuth AustmZia and more than 2.9 times the memge mouxt produced per factory i n Western AustmZia and TasmmZa.

Cheese factories

. Decreases i n the nunber of factories p r o d ~ & ~ eheeas for equaZisation occurred i n aZZ but the Zcirgest tonuage eategoqy.

Increassd c?hs&se p~o~jisctican (except i n South Australia) combine J w%th &c~ecsing factory numbers (except i n Western Australia) resulted i n si,gnificaant increases i n average production per factmy mnginlj fpom 34% i n Western AaatraZia to 234% i n Tasmania.

Butter and Cheese P~oducti.on by Ownership Type

. CO-operat.ilres p~oddced approximately 852 of if;he LotaZ amomt of butter passhg th~oagh @qurxZ<sni%on i n Au~emZia behdeen 19 70- 71 and 2975-76.

. Propl?ictaq J'izct~riso p~odv-ced approximately 52% of the total m o m t of chccoe r?asozxg through equalisation i n AustraZia beh~een 18 70-71 m;".i Z!t 75- 76; however, th is propoption ranged from 72% C12 I f ictm~ia and 772 i n Western Australia to 24% i n N e w ;SiaaatF, Wales arLd SoutP~ Austrcrlin dumkg 2975-76.

. Fo~Qj-ni-m pezq cent o f faclFlories pm&cinq cheese i n Australia &d not pwlra&~ct;l for ct=p+"c7.isatz'sn; these were generally smaZZ. p m p . ~ % a - k ~ y i faaf3Zai~3 pz?:xh;t@irq non- cheROA2r cheeses. Only 8% of &he czhesse -;vn&a?d i n A16straLia d d n g 1975-76 did not pass

L ' 9 . thxg~tgh s~~~a l -znn l : i .m,

~ Dairy Factory Adj~astment

me Ad~c~p,nAqc i n t he number of butter and cheese factories i n Azd,~t,~-aZin beta?t~e?z 1870 azd 2976 wm predominantly the result of sz.if-3 (78%) cr;zd changes tP' ~&c~civaZ depots ( 2 1%) . ir'm s?z$Iw~z~';u^ i f 2 th5 d z i q pmcessing sector were concentrated evti~*:: Zg i;z "awn rm: 1.k p2rnL .~ cmd 'Zn high value fancy pnvduc-ts , with . e3cep tion a f the e n t q of iao cheese and hy-produc&~ p-km*.

em oery f ~ w ~ ~ S B S where daimj factories changed factory c7a?sif<cat2:rm bebeen 2970 nnd 1976; factoYSias ten&d t o

contime producing along the some main product line.

Factory Flexihi l i t y

. Dairy factom:es in Aus-k~alia genemZZy produce rmly one main product, and it,s cmphnentb;. and thus may bs in f ZeaSbk. with respect Ib;o product li;+s. Dza ciramntic dccrease i n the mount of butter produced, since 1970, cppears t o haje cscurred mainly as the result of the m6-t of butter factoriss a d h n t u r n s i n th~oughput atd no$ cz; ;z ~si3u?kt of changes in. product m k of factories.

Util isat ion

. 2 % ~ C X ~ J C P ~ ~ ~ Zevei! '7f da i ry faetomj capacity u t i l i sat ion i n A263 kmtia i s IGU, p~"7:m~zriZy becausc of dxmatic seasonaZ f Zucduixt$om i n the supp 7.y of milk. O n the basis of comparisons bs k,>cen aoarage p r ~ d ~ c ~ t i m z m d peak month Zy throughput of 99 74- 75, u.b$ l isatian of fiqctoqj capacity i n 29 74- 7.5 and 19 76- 76 h m been tsntatively estimated a t 55%.

Changes i n Factory Output

. Although a Zarge nwnber of butter facf;oKes hm~e exCted, 54% of the remaining butter factories expex6erded fuZZs i n production after 1970-71 o f more than 10%; only 29% iwreased produotion.

In contrast, 66% of remaining cheese fac-Lories (j~roduci~lg for eqm Zisation) increased production by more thmz 10% af ter 19 70- 71; only 14% reduced production.

Introduction

Background

The Australian dairy processing s ec to r has been under pressure f o r adjustment f o r a number of years. This has been a r e s u l t o f :

(1) a s i gn i f i c an t decrease i n t h e t o t a l amount of milk produced i n Austral ia;

(2) continuing concentration of milk production i n t he south-eastern region of Austral ia;

(3) continuing cost i n f l a t i o n combined with re turns fmm milk products which generally have not increased with tkc r a t 0 of i n f l a t i on ;

(4) a change i n t h e r e l a t i v e p r o f i t a b i l i t y of milk products r e su l t i ng i n a s h i f t away from t h e production of huteer t o cheese and other processed daix-y products;

(5) a decrease i n t h e l eve l of domestic consumption of some milk products, especia l ly bu t te r ;

(6) a rap id increase i n the manufacture of skim milk powder (SW) requir ing new cap i ta l investments; t h i s occurred as a r e s u l t of the change over from del ivery of cream t o del ivery of wholemilk and of high SW prices ; t h i s plus 5 above has l ed t o

(7) continued dependence on an unstable export market f o r bu t t e r , SMP and o ther dai ry products.

From i t s peak l eve l of 7523 mil l ion l i t r e s i n 1969-70 Austral ian wholemilk production f e l l 16.6% t o 6276 mill ion l i t r e s i n 1975-76. Output declined i n a l l S ta tes with t h e g r ea t e s t percentage f a l l s occurring i n New South Wales, Queensland and South Austral ia. The grea tes t absolute decline, however, occurred i n t he major producing S ta te , Victor ia (see Table No. 1).

The reduction i n milk output between 1969-90 and 1975-76 resu l ted i n a f a l l of some 20% i n the volume of milk used fo r manufacturing. Changes i n r e l a t i v e market re tu rns f o r t he various products, however, have resu l ted i n markedly d i f f e r en t trends i n production. For example, between 1969-70 and 1975-76 prsdirction of b u t t e r and condensed milk each f e l l by one-third t o 147 600 t o m e s and 62 300 tonnes respect ively , while output of casein f e l l by j u s t over 50% t o

I'eble ho. 1

WKILMILK PRODUCTROM AND UTILISATION I N BUTTER AND CHEESE PRODUCTION : KJSTRALIA : 1969-70 TO 1975-76

Y e a r Unit N.S.W. Vic. Q%d S . A . W.A. Tas. Aust. (a)

FPBbijC1'_TfSM OF' WBOLEMILK

1969-70 million 1213 4028 870 483 254 469 litres 7523

1970-71 1971-72 1972-73 1973-74 1974-75 1975-76 @)

Change 1970-71 to 1974-75

FJTIQLEd-TLK U:-YED FOR %Fi3' .PRQI!UCl'ION OF CHEESE

million litres

C h a n g e 1970-71 to 1974- 75 % +.18.5 a24.6 +28.6 +2.1 +1S.S +121,4 +25.5

(a) Includes pro\l;lrrt ion in the A.C,T. an3 t h e Northern T e r r i t o r y . (p) Preliminary.

15 500 tonnes. Production of cheese, on the o ther hand, rose by 47% t o 112 200 tonnes. Output of SMP rose by 55% t o 146 200 tonnes, while t h a t of f u l l cream powdered milk increased by 80% t o 41 400 tonnes (Table No. 2). A sharp increase i n SMP output which occurred, despi te t he f a l l i n b u t t e r production, was a t t r i bu t ab l e l a rge ly t o the changeover from t h e del ivery of cream t o t he delivery of wholemilk t o f ac to r i e s and t o t h e decl ine i n casein production, r e f l ec t i ng t h e r e l a t i v e l y more favourable re tu rns received f o r SMP i n t he f i r s t half of t he 1.970s.

Domestic demand pat terns have a l s ~ been changing. Consmpti.on of b u t t e r per head has been trending downward s ince the 1950s and t h i s , combined with t h e easing i n t he r a t e of population growth i rn the 1970s, has resu l ted i n a decl ine i n t o t a l consumption. Between 1969-70 and 1975-76, f o r example, t o t a l bu t t e r consumption dsc l j i:ed by almost one-fif th t o an estimated 93 500 tcrmes. Domestic m a r k e t usw::e of cheese and t he dr ied milk powders, on the o ther hand, has been trending upward. However, t h i s has not been su f f i c i en t t o o f f s e t thc e f f ec t of t he decl ine i n b u t t e r consumption with t h e r e s u l t t ha t the domestic market far da i ry products is contracting.

Thus, although there has been a decline i n both t o t a l milk output and i n t h e volume of milk used f o r manufacturing, t he contraction of t he domestic market has meant t h a t a subs tan t ia l proportion of Austral ian wholemilk production (approximately 39%) s t i l l has t o be disposed of on the increasingly uncer ta in and unstable export market.

The economic pressures on dairy farmers a r i s i ng Trom a contracting domestic market, rapidly r i s i n g costs and f luc tua t ing export re tu rns have l ed t o an increasing concentration of t he manufacturing s ec to r of t h e industry i n the more favourable dairying areas i n south-eastern Austra l ia , notably i n Victor ia which, desp i te a severe drought, accounted f o r 56% of t o t a l Austral ian wholemilk prodllction i n 1975-76, compared with 54% i n 1969-70 and 49% i n 1364-65 (Table No. 1 ) .

Further, t h e pressure f o r adjustment i n t he dairy processing s ec to r is no t l i k e l y t o subside i n t h e near fu tu re . Despite t h e easing of t he drought during t h e l a s t 3 months of 1976, t h e combination of reduced c a t t l e numbers and cows enter ing l a c t a t i on i n poor condition ind ica tes t h a t i n 1976-77 t o t a l milk production w i l l again f a l l by some 12% t o 5600 mil l ion l i t r e s . Given normal seasonal conditions, production i s expected t o recover i n 1977-78 to a level more i n l i n e witli t he dc~wnward t rend evident s ince 1969-70; t h i s downward trend is projected t o r e s u l t i n milk production t o t a l l i n g some 5400 mil l ion l i t r e s i n 1979-80,(P)

Returns from exports i n 1976-77 a r e estimated to be s ign i f i c an t l y lower than i n t he previous year, despi te t h e recent devaluation i n t he $A. Export p r ices a r e generally depressed for most of the major products, pa r t i cu l a r l y f o r SMP. By mid-1976 t h e p r i c e of SMP had f a l l e n t o GATT minimum l eve l of US$350 ($A289 a t t h e then prevai l ing exchange r a t e ) per tonne and although it recovered s l i g h t l y t o US$40O ($A324) pe r tonne by November 1976, it was sti l l well below the l eve l a year e a r l i e r . Prices of most of t he other major products (but ter and cheese excepted) have a l so declined from year e a r l i e r l eve l s but not t o the same extent as t h a t of SMP. These pr ice movements r e f l e c t t h e

(1) BAE , A g r i c u Ztura Supp 23 Projections, Aus trazia 1.979-80, Qccasional Paper No. 37, Volume 11, Canberra, 1976, p. 68.

Table No. 2

MANUPACTURE OF DAIRY PRODUCTS : AUSTRALIA : 1964-65 TO 1975- 76

C' 000 Tonnes)

Powdered Butt e r (a) Cheese (b) Powdered Infants, Powdered ternilk

Concentrated Full Year [factory and Skim o r Mixed Casein

Invalids

production) Cheddar Total Evaporated Cream and Health Milk Milk Beverages (d) Skim and

Milk (c) Buttermilk

1974-75 161.4 68.7 98.9 60.1 44.4 33.5 157.7 11.5 13.5

1975-76 (p) 147.6 79.6 112.2 62.3 41.4 27.2 11.8 15.5 146.2

-- -p

[a) Includes t he bu t t e r equivalent of bu t t e r o i l production. @) Non-processed cheeses only. (c) Includes sweetened and unsweetaned wholemilk and skim milk and 'coffee and milk'. Cd) Includes malted milk. (p) Preliminary. na, not avai lable .

Sources: Austral ian Bureau of S t a t i s t i c s , StatisticaZ BuZZetin : The Dairying Industry Cvarious i s sues ) ; id., AustraZian Production Stat is t ics : Prsduction S m m y ND. 36 : Process& NiZk L%odu~~s [various issues) id., Production Swnnary No. 55 : h t t e r and Cheese (yarious issues) .

s i tua t ion i n the international market which is overshadowed by huge stocks of SMP (about 2 million tonnes i n January 1976, most of which were concentrated i n the EEC) and much smaller, but s t i l l substantial , stocks of but te r and cheese.

Although market milk prices and returns from cheese sold on the domestic market are expected to generally follow movements i n the CPI, the overall return from those manufactured products whose prices a r e influenced by the export s i tua t ion o r where domestic demand is contracting (e.g. fo r butter) a re l ike ly to decline fur ther i n real terms.(2)

The implementation of a new marketing arrangement, s imilar t o that proposed by the IAC, could create additional pressure f o r adjustment i n the processing sector. These pressures could a r i s e from: (a) decreases i n the level of milk production i n response to unprofitable exports, (b) changes i n the product mix, more i n accordance with domestic requirements, (c) regional changes i n the level of milk production because of the t ransfer of entitlements and (d) the elimination of allowances.

The l ike ly e f fec t of a l l these forces on the dairy processing sector is unknown. However, it is c lear that pressures bearing on the processing sector can detrimentally a f fec t dairy farmers whose response i n turn can amplify the pressures on the processing sector. Cost inf la t ion , decreasing levels of throughput, the lack of investment i n new e f f i c i en t plant f a c i l i t i e s (because of an uncertain but currently poor economic environment) a l l a f fec t costs of production and consequently a f f ec t returns t o dairy farmers. Dairy farmers, presently with very low net farm incomes and facing cost inf lat ion, may respond to decreased returns by exiting from dairying o r by reducing the to t a l amount of milk produced. A decrease i n the supply of milk reduces the level of u t i l i s a t i o n of factory capacity and increases the costs of processing milk s t i l l further. In some cases a reduction i n the level of supply could cause the ex i t of factor ies which, i n turn, could cause the e x i t of additional dairy farmers.

Scope of the Report

The present report encompasses four areas:

( i ) the physical s t ructure of the dairy processing sector;

( i i ) ownership patterns i n the processing sector;

( i i i ) s t ructural change i n the processing sector over the l a s t f i v e years; and

(iv) u t i l i s a t i o n of factory capacity.

The data presented i n th i s report was provided t o the BAE by Sta te Departments of Agriculture, the Commonwealth Dairy Produce Equalisation Committee, the Australian Dairy Corporation and the Commonwealth Department of Primary Industry.

(2) BAE, Dairy Products: Situation and OutZook, Canberra, 1977, p. 3 .

Table No. 3

DISPOSAL OF WHOLEMILK : AUSTRALIA(a)

1964-65 to 1975-76

Domestic Consumption

Year Fluid Per Export S Milkand Butter Cheese Other Total Person Cream (b)

million million million million million million litres litres litres litres litres litres litres

1964-65 1588 2386 3 79 272 4625 412 2524

1974-75 (g) 1589 2041 547

1975-76@) 1626 1902 483

(a) Including milk for liquid consumption and wholemilk equivalent of dairy products. (b) Includes milk used for farm production of butter and cheese. (p) Preliminary. (S) BAE estimate. na, not available.

Sources: Australian Bureau of Statistics, Overseas *ade (various issues); id., A p p e n t Conswrrption of Foodstuffs and Iibtrients i n AustraZia (various issues); id., Production S m y No. 55: Butter and Cheese [various issues) ; id., WhoZemiZk Production and Ut.iZisatwn: AustraZia Cvarious issues).

Dai ry Factory Number and Ownershi p

Table No. 4 shows t h e number of dairy fac tor ies i n existence i n Austra l ia during 1970 and during 1976. Factories a r e categorised according t o t h e i r product mix(3) and according t o type of ownership. I f the factory was a co-operative the t ab l e a l so shows whether o r not the factory was associated with a large co-operative en te rpr i se (composed of 4 o r more fac tor ies ) .

In 1970, 404 dairy fac tor ies were operating i n Australia. A l a rge pa r t of these were c l a s s i f i ed a s bu t t e r and by-products plants (99), town milk p lan ts (71), multi-product plants (73), high value fancy products plants (55) and cheese and by-products plants (51). In 1970, 32 receival depots a l so were i n existence. Proprietorship was t h e predominant type of ownership of town milk plants and high value fancy product plants . A large proportion (82%) of t h e bu t t e r and by-products p lan ts operating i n Austra l ia during 1970 were owned by co-operatives. Forty per cent of co-operative dairy fac tor ies i n Austra l ia during 1970 were members of large co-operative enterpr ises (composed of 4 o r more fac tor ies ) .

During t h e period between 1970 and 1976 a rapid reduction i n the number of dairy fac tor ies i n Austra l ia occurred; factory numbers decreased from 404 t o 324 o r by 20%. A l a rge proportion (39%) of the exi t ing fac tor ies were bu t t e r and by-product fac tor ies which decreased i n number by 61%. Co-operatives producing cheese decreased i n number by 45% between 1970 and 1976 and propr ie tar ies c l a s s i f i ed as town milk p lan ts decreased i n number by 19%.

On the other hand, t he number of high value fancy products plants and milk depots, i n Austra l ia , increased by 24% and 6% respectively between 1970 and 1976.

During the same period, the number of multi-product p lan ts , i n Australia, declined by only 8%.

Overall, the number of propr ie tary dairy f ac to r i e s f e l l from 195 t o 173, i . e . by 11%. Co-operative numbers f e l l from 209 to 151, i . e . by 28%.

Forty-nine per cent of co-operative f ac to r i e s operating i n 1976 were associated with large co-operative enterpr ises composed of four o r more f ac to r i e s .

Changes i n factory numbers and i n ownership pat terns a t t h e S t a t e level followed qu i te closely those a t t he nat ional level , with t h e following differences:

New South Wales

. Dairy factorynumbersinNew South Wales f e l l by only 12% between 1970 and 1976; almost a l l of t h i s was concentrated among co-operatives c l a s s i f i ed a s bu t t e r and by-products plants which declined by 52%.

See Appendix.

- l0 -

Table No. 4

NUMBER OF FACTORIES : BY OWNERSHIP TYPE AUSTRALIA AND STATES : 1970 AND 1976

Proprietaries Co-operatives Co-operatives Total

Type Land others] (over 3 ) C3 or less )

1970 1976 1970 1976 1970 1976 1970 1976

SingZe Product A U r n L I A

Type Factory

Town milk 52 41 9 13 10 8 71 6 2 Fancy products 5 0 6 2 4 5 1 1 5 5 6 8 Cheese C*] 2 0 15 10 7 21 1 Q 51 32 Butter C+) 18 8 2 9 7 5 2 24 9 9 39 Depots (nei) 13 6 12 18 7 10 3 2 34 Other 14 13 2 5 7 4 23 22

Sub-total 167 14'5 66 55 98 57 331 257

Mu t ti -produe t Factory

Associated with urban milk processing 16 15 16 13 11 12 43 40

Other 12 13 5 6 13 8 3 0 2 7

Sub-total 2 8 2 8 21 19 24 2 0 73 67

Total

S i q Z e Product lVEW SOUTE WALES line 2. A. C. T. 1

Fmtow Tom milk 12 11 5 4 5 5 22 20 Fancy products 11 14 0 1 0 0 11 15 Cheese C+) 1 2 1 1 5 2 7 5 Butter C+) 0 0 3 1 18 9 21 10 Depots (nei) 3 0 8 8 4 7 15 15 Other 4 5 1 1 0 0 5 6

Sub-total 3 1 32 18 16 3 2 23 8 1 7 1

Multi-product Factory

Associated with urban milk processing 4 4 4 4 3 3 11 11

Other 4 4 0 0 4 3 8 7

Sub-total 8 8 4 4 7 6 19 18

Total 39 40 22 2 0 39 29 109 8 9

( .on t imed on next page)

Table No. 4 bonti-nued)

Proprietaries Co-operatives Co-operatives T~~~~ (and others] (over 3) (3 or l e s s )

Type 1970 1976 1970 1976 1970 1976 1970 1976

Single Product Type Factory

Town milk Fancy products Cheese (+) Butter C+) Depots (nei) Other

Mu2 ti-product F a c t o r y

Associated with urban milk processing

Other

VICTORIA

Total 9 1 75 21 22 3 2 14

S&qZe Produet Type Factory

Town milk Fancy products Cheese C+) Butter C+] Depots (nei) Other

Sub-total

Mu2 ti-product Factory

Associated with urban milk processing

Other

Total

(Continued on next page)

Table No. 4 Ccontinuedl

Proprietaries Co-operatives Co-operatives (and others) Cover 3) (3 or less ) Total

Type 1970 1976 1970 1976 1970 1976 1970 1976

Single Product SOUTE AUSTRALIA

Type Factory

Town milk 2 2 3 5 1 0 6 7 Fancy products 6 5 3 3 0 0 9 8 Cheese C+) 4 2 5 4 7 1 16 7 Butter C+) 2 0 4 3 0 0 6 3 Depots 3 1 1 1 1 0 5 2 Other 0 0 0 0 0 0 0 0

Sub-total 1 7 10 16 16 9 1 4 2 27 ~ ~ Z t i - p r o d u c t Factory

Associated with urban milk processing 1 0 2 2 0 0 3 2

Other 1 1 2 2 0 0 3 3

Sub-total 2 1 4 4 0 0 6 5

Total 19 11 2 0 20 9 1 48 3 2

Single Product Qpe Factory

WSTERfl AUSTRALIA

Town milk l 1 0 0 0 0 1 1 Fancy products 4 8 0 0 1 1 5 9 Cheese C+) 2 2 0 0 1 1 3 3 Butter (+) 3 2 0 Q 2 1 5 3 Depots Cnei) 2 2 Q 0 1 1 3 3 Other 0 0 0 0 1 0 1 0

Sub-total 12 15 0 0 6 4 18 19

&idti-product Factory

Associated with urban milk processjng 3 3 0 0 1 0 4 3

Other 0 0 0 0 0 0 0 0

Sub-total 3 3 0 0 1 0 4 3

Tot a1 15 18 0 0 7 4 2 2 22

lcontimed on next page)

Table No. 4 Icontinued)

Proprietaries Co-operatives Co-operatives Total Cand others) (over 3) C3 or less)

Single Product Qpe Fac tory

Town mi lk

Fancy products

Cheese C+)

Butt er (+)

Depots (nei)

Other

Sub-total

hl t i -produet Factory

Associated with urban milk processing

Other 0 1 0 0 3 1 3 2

Total 12 10 4 0 9 7 2 5 17

C+) Including by-products. (nei) Not elsewhere included.

Victoria

. Most of the co-operatives i n Victoria were associated with large multi-co-operative enterprises during 1976.

. Co-operatively owned but te r and by-products plants i n Victoria, not associated with large multi-co-operative enterprises, decreased by 65% between 1970 and 1976.

. A high proportion of dairy fac tor ies i n Victoria were owned by proprietorships during t h e period from 1970 t o 1976; i n 1976 the proportion was 68%.

Queens Zand

. The most dramatic decrease i n factory numbers i n Queensland occurred among co-operatively owned but te r and by-products fac tor ies associated with large multi-co-operative enterprises where factory numbers f e l l from 9 to 1.

South AUS trcxzia

. The number of cheese and by-products plants i n South Australia decreased from 16 t o 7 o r by 56%; t h i s was the r e su l t i n large pa r t of the joining of a number of small co-operative factor ies i n building and supplying one large factory.

Western Aus traZia

. Factory numbers i n Western Australia remained re la t ive ly s tab le except i n the case of but te r and by-products plants which decreased from 5 t o 3.

. Forty-one per cent of the dairy factor ies i n Western Australia during 1976 were c lass i f ied as high value fancy products plants.

Tasmania

. No factor ies c lass i f ied as milk depots operated i n Tasmania between 1970 and 1976.

Size and Number o f Butter and Cheese Factories i n Equal i sa t ion

This section provides information on the s i ze and number of factor ies producing but te r and cheese f o r equalisation. These figures need t o be interpreted with some caution.(4) However, they do indicate the type of s t ruc tura l change which has occurred i n a large, important par t of the dairy processing sector.

(4) Many fac tor ies producing fancy cheese a re not i n equalisation (see p. 24) and therefore a re not counted while factor ies producing both cheese and but te r f o r equalisation are double counted. Also some enterprises submit aggregated returns fo r a number of factor ies . Data provided by the State Departments. of Agriculture were used i n these cases t o estimate production on a per factory basis.

Butter Factories

A t t he national level the number of fac tor ies producing bu t t e r i n equal isa t ion decreased from 140 i n 1970-71 t o 76 i n 1975-76 (Table No. 5). During t h i s period there was a decrease i n t he number of fac tor ies within each s i z e category except i n the 10 000 tonnage and above category where factory number increased from 1 t o 2. The proportion of f ac to r i e s , i n Austra l ia , producing l e s s than 1000 tonnes of bu t t e r per year decreased from 61% i n 1970-71 to 58% i n 1975-76.

Only 25% of the bu t t e r fac tor ies i n Victoria and Western Austra l ia produced l e s s than 1000 tonnes of bu t t e r f o r equalisation i n 1975-76 i n contras t t o 88% i n New South Wales, 85% i n Queensland, 60% i n South Austra l ia and 57% i n Tasmania,

Table No. 6 shows t h e dramatic drop i n the leve l of bu t t e r produced f o r equalisation which occurred i n most S ta tes from 1970-71 through 1975-76. The decrease ranged from 51% and 50% i n New South Wales and South Austra l ia t o 16% and 21% i n Western Austra l ia and Victor ia respectively.

Table No. 7 shows t h e r e s u l t s of r e l a t i ng numbers of fac tor ies producing bu t t e r (and cheese) f o r equal isa t ion i n each S ta te , t o t he l eve l of b u t t e r (and cheese) produced f o r equalisation.

A t t h e national level , it can be seen tha t bu t t e r factory numbers have decreased a t a f a s t e r r a t e than the leve l of bu t t e r produced; the average level of bu t t e r produced per factory increased by 34% from 1970-71 t o 1975-76.

This increase i n the average level of bu t t e r produced per factory i n Austra l ia is primarily a t t r i bu t ed t o t he rapid s t ruc tu ra l change which occurred i n Victor ia combined with only a moderate decrease i n t h e l eve l of bu t t e r produced. Victoria, which produced 73% of the b u t t e r manufactured i n Austra l ia i n 1975-76 (Table No. 6), experienced a 50% reduction i n the number of bu t t e r fac tor ies but only a 21% reduction i n t he l eve l of bu t t e r production, resu l t ing i n a 57% increase i n t he average amount of bu t t e r produced per factory, from 1970-71 through 1975-76. Western Austra l ia and Tasmania a l so showed increases i n the average amount of bu t t e r produced per factory of 26% and 35% respectively. The r a t e of e x i t of bu t te r fac tor ies i n Queensland matched the decrease i n the leve l of b u t t e r production; the average level of bu t t e r produced per factory changed by only 1%. In New South Wales and South Austra l ia bu t t e r production f e l l a t a f a s t e r r a t e than the f a l l i n the number of bu t t e r factor ies ; t he average leve l of bu t t e r production f e l l by 5% and 11% i n New South Wales and South Austra l ia respectively.

The average amount of bu t t e r produced per factory i n Victoria i n 1975-76 was grea te r than seven times t h e average amount of bu t t e r produced per factory i n New South Wales, Queensland and South Austra l ia and more than 2.9 times t h e average amount produced per factory i n Western Australia and Tasmania.

The l a rges t 50% of bu t t e r f ac to r i e s i n each S t a t e produced more than 74% of the S t a t e ' s bu t te r production i n 1970-71 (Table No 81. During 1975-76 the proportion of bu t t e r produced by t h e la rges t 50% of b u t t e r fac tor ies remained roughly t h e same. However, t he proportion was produced

Table No.

DISTRIBUTION OF BUTTER PRODUCING FACTORIES : BY PRODUCTION

PASSING THROUGH EQUALISATION : BY STATE : 1970-71 AND 1975-76

N. S. W. Vic. Id S.A. W.A. Tas . Total Production 1970 1975 1970 1975 197% 1975 1970 1975 1970 1975 1970 1975 1970 1975

-71 -76 -71 -76 -71 -76 -71 -76 -71 -76 -71 -76 -71 -76

tonnes

Under

100 and under

1 000 and under 5 000 4 2 25 11 4 3 4 2 2 3 5 3 44 24

5 000 and under

10 000 and over

Total

Table No. 6

LEVEL OF AUSTRALIAN BUTTER AND CHEESE PRODUCTION

PASSING THROUGH EQUALISATION (a) : BY STATE

1970-71 TO 1975-76

Year Unit N.S.W. Vic. Qld S.A. W.A. Tas. Total

1970-71 tonnes

1971-72 I I

Percentage change 1975- 76 on 1970-71 %

BUTTER

21 279 136 856 18 770

19 339 131 448 18 195

17 541 128 597 15 879

13 285 128 255 11 701

9 829 119 358 10 383

10 327 107 730 10 974

CHEESE

1970-71 tonnes 5919 32 800 7 463 18 445 1915 5 504 72 046

1971-72 1 1 6130 33 396 8 057 17 820 1913 5 867 73 183

1972-73 11 7790 43 165 8 558 16 612 1799 7 184 85 108

Percentage change 19 75- 76

6 on 1970-71 "

(a) These values were derived from aggregate f igures supplied by t h e Commonwealth Dairy Produce Equalisat ion Committee.

Table No. '7

AVERAGE LEVEL OF PRODUCTION OF BUTTER AND CHEESE

PER FACTORY IN EQUALISATION : 1970-71 AND 1975-76

Item Unit N.S.W. Vic. Qld S.A. W.A. Tas. Total

BUTTER

1970-71 tonnes

1975-76 tonnes

Change %

CEEESE

1970-71 tonnes

1975-76 tonnes

Change %

Note: Numbers in parentheses are numbers of factories.

Table No. 8

PERCENTAGE DISTRIBUTION OF BUTTER PRODUCTION BY QUARTILE OF FACTORIES IN EQUALISATION (a)

1970-71 AND 1975-76

Quartile of Factories

Unit N.S.W. Vic . Qld S.A. W.A. Tas.

Largest 50% 11

3rd l1

4th I I

Smallest 50% l I

Total l I

No. of factories no.

1st %

2nd I I

Largest 50% I I

4th I! 1.2 2 .O 5 .O 1.9 8.4 9.3

Smallest 50% 1 I 10.9 12.1 16.0 13.4 31.0 22.1

Total 100.0 100.0 100.0 100.0 100.0 100.0

I No. of factories no. 17 25 18 5 4 7

(a) Quartiles were derived by linear interpolation where total factory numbers were not exactly divisible by four. In each case, the '1st' is the largest and '4th' is the smallest.

by fewer fac tor ies . For example, t he 25 l a rges t out of 50 b u t t e r f ac to r i e s i n Victoria produced 87% of t h e bu t t e r produced i n Victor ia i n 1970-71. During 1975-76 t h e l a rges t '12%' fac tor ies , out of 25 bu t t e r fac tor ies , produced 88% of the bu t t e r manufactured i n Victoria.

Cheese Factories

The number of fac tor ies producing cheese f o r equalisation i n Austra l ia decreased from 73 i n 1970-71 to 51 i n 1975-76 (Table No. 9).

l Decreases occurred i n each s i ze category except i n the 1000 tonnes and above category where factory number increased from 20 t o 29. The

l proportion i n the th ree categories producing under 700 tonnes per year decreased from 60% i n 1970-71 t o 37% i n 1975-76.

The most dramatic change i n the s i z e d i s t r ibu t ion of cheese f ac to r i e s occurred i n Queensland where t he number of fac tor ies producing less than 300 tonnes of cheese per year decreased from s i x t o zero and where the number of f ac to r i e s producing more than 1000 tonnes of cheese

l increased from two t o s i x over the f i ve year period.

In s p i t e of a 30% reduction i n the number of cheese f ac to r i e s , the amount of cheese passing through equalisation increased i n a l l S ta tes from 1970-71 through 1975-76 except i n South Australia which had a decrease of 2% (Table No. 6) . Increases i n the amount of cheese produced f o r equal isa t ion were highest i n Tasmania (141%), Queensland (65%) and New South Wales (59%).

Increased cheese production (except i n South Australia) combined with decreasing factory numbers (except i n Western Australia) resu l ted i n s ign i f ican t increases i n average production per plant ranging from 34% i n Western Austra l ia t o 234% i n Tasmania (Table No. 7). Western Austra l ia was t h e only S t a t e i n which t h e average increase i n the amount of cheese production ( for equalisation) per factory did not increase a t a f a s t e r r a t e than the increase i n cheese produced (34%).

Average factory s izes were la rges t i n Tasmania (4492 tonnes of cheese f o r equal isa t ion per year) and Victor ia (3371) and smallest i n Western Austra l ia (641) and New South Wales (861) .

A la rge proportion of t he cheese produced i n most S ta tes was produced by the l a rges t 25% of cheese factor ies ; f o r example, t h i s proportion was 41% i n South Austra l ia and 65% i n Victoria. Exceptions were Western Austra l ia and Tasmania, where t he cheese f ac to r i e s i n these S t a t e s were r e l a t i ve ly equal i n s i z e during 1975-76. L i t t l e change occurred i n t h e qua r t i l e d i s t r ibu t ion between 1970-71 and 1975-76 except i n t he number of fac tor ies involved (Table No. 10) . Butter and Cheese Production by Ownership Type

Butter production i n Austra l ia has largely been carr ied out by co-operatives. In 1970-71 and 1975-76 co-operatives, produced approximately 85% of the t o t a l amount of bu t te r , f o r equalisation, i n Austra l ia . Co-operatives produced v i r t u a l l y a l l the b u t t e r i n South Austra l ia during 1975-76 and, except f o r Western Australia, the proportion of b u t t e r produced by co-operatives i n each of t h e other S ta tes exceeded 84%. In Western Australia, co-operatives produced only 54% of the bu t t e r during 1970-71 and by 1975-76 t h i s f igure had f a l l e n t o 42% (Table No. 11) .

Table No, 9

DISTRIBUTION OF CHEESE PRODUCING FACTORIES : BY PRODUCTION PASSING THROUGH EQUALISATION : BY STATE : 1970-71 AND 1975-76

Production N.S.W. V i c . Qld S.A. W.A. Tas . Total

1970 1975 1970 1975 1970 1975 1970 1975 1970 1975 1970 1975 1970 1975

tonnes

Under 100 5 1 2 1 3 0 0 0 0 0 1 0 11 2

100 and under 300

1

300 and under 700 3 4 2 1 3 2 6 2 3 4 0 0 17 13

700 and under 1000 1 1 1 1 3 1 4 0 0 0 0 0 9 3

1000 and over 2 3 7 9 2 6 7 8 0 0 2 3 20 29

Total 16 l1 17 14 14 9 18 10 4 4 4 3 73 51

Table No. 10

PERCENTAGE DISTRIBUTION OF CHEESE PRODUCTION BY QUARTILE OF FACTORIES IN EQUALISATIONCa)

1970-71 AND 1975-76

Quartile of Unit N.S.W. Vic. Qld S.A. W.A. Tas . Factories

~ Largest 50% l l 88.5 94.3 83.3 73.3 67.5 94.5

Smallest 50% 1 l

Total l1 100.0 100.0 100.0 100.0 100.0 100.0

No. of factories no. 16 17 14 18 4 4

1975-76

Largest 50% I I 85.8 90.4 74.0 70.2 52.2 62.8

Tot a1 11 100.0 100.0 100.0 100.0 100.0 100.0

No. of factories no. 11 14 9 10 4 3

(a) Quartiles were derived by linear interpolation where total factory numbers were not exactly divisible by four. In each case, the list' is the largest and '4th' is the smallest.

Table No. 11

DISTRIBUTION OF AUSTRALIAN BUTTER AND CHEESE PRODUCTION PASSING THROUGH EQUALISATION : BY FACTORY OWNERSHIP TYPE

1970-71 AND 1975-76

(Percentages)

N.S.W. Vic. Qld S.A. W.A. Tas. Total Type 1970 1975 1970 1975 1970 1975 1970 1975 1970 1975 1970 1975 1970 1975

-71 -76 -71 -76 -71 -76 -71 -76 -71 -76 -71 -76 -71 - 76 BUTTER

Co-operative 92 89 83 84 96 9 6 73 100 54 4 2 9 7 95 85 85

Proprietary I

firm 8 11 17 16 4 4 27 0 4 6 5 8 3 5 15 15 p3 tA

Total 100 loo 100 100 100 100 100 100 100 100 100 100 100 100 I

CHEESE

Co-operative 93 7 6 18 2 9 74 66 77 7 6 3 5 2 3 52 4 3 49 48

Proprietary Firm 7 24 8 2 7 1 26 34 2 3 24 6 5 7 7 4 8 57 5 1 52

Total 100 100 100 100 100 100 100 100 100 100 100 100 100 100

The ownership type of the main cheese producers i n Australia is much more diverse. In both 1970-71 and 1975-76 approximately 52% of the t o t a l amount of cheese produced i n Australia, fo r equalisation, was produced by proprietary factor ies . I n Victoria, proprietary factor ies manufactured 82% and 71% of the cheese produced i n the S ta te during 1970-71 and 1975-76 respectively. Proprietary factor ies were also the main producers i n Western Australia and Tasmania i n 1975-76. On the other hand, co-operatives dominated cheese production i n New South Wales, Queensland and South Australia.

Overall there was no tendency fo r proprietar ies t o produce a smaller proportion of Australian bu t t e r o r f o r co-operatives t o produce a larger proportion of Australian cheese, under equalisation, over the f ive ~ year period.

Only about 51% of factor ies producing cheese i n Australia during 1975-76 produced cheese f o r equalisation. However, cheese passing through equalisation accounted f o r 92% of the t o t a l amount of cheese produced i n Australia during 1975-76. Factories producing cheese outside equalisation were predominantly proprietary factor ies (89%) producing non-cheddar cheeses .

Virtually a l l of the but te r produced i n Australia during 1975-76 passed through equalisation.

Dairy Factory Adjustment

Table No. 12 makes more exp l i c i t the type of factory adjustment which took place between 1970 and 1976. The reduction i n factor ies c lass i f ied a s cheese and by-products plants from 51 t o 32 was primarily the r e s u l t of 19 ex i t s and of two factor ies changing t o receival depots. In addition two cheese factor ies moved in to the multi-product c lass i f ica t ion , two existing plants changed over t o cheese production and two new cheese fac tor ies entered the industry. Similarly, the reduction i n bu t t e r and by-products fac tor ies from 99 to 39 was primarily the r e su l t of 43 ex i t s and seven factor ies changing to receival depots.

One co-operatively owned but te r and by-products factory and two co-operatively owned cheese and by-products factor ies became associated with large multi-co-operative enterprises between 1970 and 1976.

On the other hand, f ive co-operatively owned but te r factor ies were rec lass i f ied as being associated with a s m a l l co-operative enterprise . This was primarily caused by factory ex i t s which resulted i n the rec lass i f ica t ion of some co-operative enterprises from t h e more than three factory category to the three o r less factory category.

New entrants i n the dairy processing sector were concentrated en t i r e ly i n town milk plants and fancy products fac tor ies , except f o r two new cheese entrants. However, i n the case of town milk plants , the r a t e of e x i t exceeded the r a t e of entry.

Factory Flexibility

The data presented above provide some information on the degree of f l e x i b i l i t y cer tain types of dairy factor ies and enterprises have f o r changing product mixes as a response to changes i n market signals.

Table No. 12

DAIRY FACTORY ADJUSTMENT : AUSTRALIA AND STATES : 1970 to 1976

No Chanee New Change in St

Total in ~taty - atus since 1970

US Entrants Total xype Butter Co-ops Cheese CO-o S Receival since Other Other 1976 1970 since

1970 1970 Exits 3 or Over h Single (a)

Less 3 Less 3 Depots Products

S i n g l e Product Type Factory

AUSTRALIA

Town milk 71 5 2 7 16 Fancy products 55 43 22 12

Cheese and by-product S

- proprietaries 20 14 2 5 1 16 I

- co-ops (3 or less) 20 7 10 2 1 9 N m

- co-ops (over 3) 11 4 4 1 1 1 7 I

Butt er and by-products

- proprietaries 18 7 - co-ops (3 or less) 50 18 - co-ops (over 3) 3 1 7

Receival depots 3 2 2 3 9 3 4 Other 2 3 17 6 2 2

Multi-product Factory

Associated with urban milk processing 43 3 7 4 2 4 0 Other 30 2 3 2 1 3 1 2 7

Total 40 4 252 3 1 111 S 1 2 3 11 6 13 324

(Continued on next page)

Table No. 12 (dcmtinued)

No Chanee New Change i n Status since 1970

Total i n s t a t e s Entrants 1970 since s ince Butter CO-Q s Cheese CO-o s Receival

Exits M d Other

1970 l970 Single Less 3 Less 3 Depots Products

Total Other 1976

(a)

3;ngZc &*~duct. Type Yactoqj

Town milk Fancy products

Cheese and by-products

- propr ie ta r ies 1 - co-ops (3 o r less ) 5 2 - co-ops (over 3) 1 1

Butter and by-products

- propr ie ta r ies - co-ops (3 o r less ) 18 9 - co-ops (over 3) 3

&%W SOL'TN WALES

Receival depots 15 11 4 15 Other 5 5 6

M u Z t i -product Factory

Associated with urban milk processing 11 11 11

Other 8 7 1 7

Total loo* 72 9 20 l 4 1 2 89

(Colztinued on next page)

Table No. 12 Ccontinued)

No Change New Change i n Status since 1970 Total Total i n Status Entrants

Type 1970 since since Butter Co-ops Cheese Co-ops Receival Other Other 1976

1970 1970 Exits 3 or Over 3 o r Over Sing l e

3 (a>

Less 3 Less Products

VICTORIA Single Product

Type Factory

Town milk Fancy product S

Cheese and by-products

- propr ie ta r ies 8 - co-ops (3 or l e s s ) 1 - co-ops (over 3) 2

Butter and by-products

- propr ie ta r ies 10 - co-ops (3 or l e s s ) 17 - co-ops (over 3) 9

Receival depots 0 ther

Associated with urban milk processing 9 5 3 1 7

Other 14 10 2 1 1 13

Total 144 88 7 40 1 5 4 6 111

(Continued on next page)

Table NO. 12 (con*<nued)

Change i n Status since 1970 No Change New - Total i n Status Entrants Total

T3Te Butter Co-ops- Cheese Co-o s R~~~~~~~ -.?ET&

Other Other 197(, 1970 since since

1970 Exits J or &%r Single 1978 Less J Loss 3 Products

Town milk Frmcy products

Cheese and by-products

- proprietaries 3 - co-ops (3 o r less) 5 - co-ops (over 3) 2

Butter and by-products

- proprietar ies 1 1 - co-ops (3 or less) 11 3 - co-ops (over 3) 9 1

Receivals depots Other

Mu Z t i -product Factoq

Associated with urban milk processing 13 13 14

Other 2 2 2

Total 65 38 8 20 2 I 1 1 2 5 3 -

(Continued on next page)

Table No. 12 Icontimed1

No Change New Change i n Sta tus s ince 1970 Total

Total i n Sta tus Entrants TYF'e Butter Co-ops Cheese Co-ops Other Other 1976

1970 s ince Since h i t s 3 o r Over 3 o r Over Receival 1970 1970 Single (a)

Less 3 Less 3 Depots Products

Total i n Sta tus Entrants Butter Co-ops Cheese Co-ops Other Other 1976 1970 s ince s ! ~ c ~ h i t s 3 o r Over 3 o r Over Receival -

19 7^ Sine l e (a) t s

SOUTH AUSTRALIA Single F~oduct Type Factory

Town milk Fancy products

Cheese and by-products

- propr ie ta r ies 4 - co-ops C3 o r l e s s ) 7 - co-ops (over 3) 5

Butter and by-products

- propr ie ta r ies 2 - co-ops C3 o r l e s s ) - co-ops (over 3) 4

Keceival depots 5 Other

ic3c Zti-product Factory

Associated with urban 3 milk processing

Other 3

Total 4 8 27 l 17 2 2 32

lCorztimed on next page)

Table No. 12 (continued)

No Change New Change i n Status $ince 1970

Total i n Sta tus Entrants Butter Co-ops Cheese Co-ops Other Other Total 1976 since since Exits 3 o r h e r 3 o r Over Receival Single 1970 1930 Less 3 Less 3 Depots Products

WESTERN AYSTR4 LIA

Town milk Fancy products

Cheese and by-products

- propr ie ta r ies 2 - co-ops (3 o r l ess ) - co-ops (over 3) 1

Butter and by-products

- propr ie ta r ies 3 - co-ops (3 o r l ess ) - co-ops (over 3) 2

Receivals depots Other

MuZCi-product Factory

Associated with urban milk processing 4 3 1 3

Other

Total 22 15 6 6 1 2 2

(Continued on next page)

Table No. 12 (continued)

No Change New Change i n S t a t u s s i n c e 1970 - . - -

Tota l i n s t a t u s Entrants But ter Co-ops Cheese Co-ops Receival Tota l 1970 s i n c e s i n c e Other Other 1976

1"7n , ,,, Exi t s 3 o r Over 3 o r Over ,_._-, Single J I U L J I V Less 3 Less 3 uepol;

prod;, c t s

Single Product TASMANIA

Type Factory

Town milk 1 1 Fancy products 2 2

Cheese and by-products

- p r o p r i e t a r i e s 2 1 - co-ops (3 o r l e s s ) 1 - co-ops (over 3)

Butt e r and by-products

- p r o p r i e t a r i e s 2 - co-ops (3 o r l e s s ) 4 - co-ops (over 3) 4

Receival depots Other 3

l Multi-product Factory

Associated with urban milk processing 3 3 3

Other 3 1 1 1 2

Total 25 1 2 8 2 . 1 1 1 17

(a) These t o t a l s cannot be d i r e c t l y derived from t h i s t a b l e due t o t h e aggregation of b u t t e r and cheese p r o p r i e t a r i e s , town milk depots and fancy product f a c t o r i e s i n t o t h e 'o ther s i n g l e product category, and the aggregation of f a c t o r i e s with and without urban milk i n t o t h e ' o the r ' category.

Dairy fac tor ies i n Austra l ia a r e generally of a s ingle product l i n e (79% producing one main product and i ts complements) and there were very few changes i n factory c l a s s i f i ca t i on (other than exi t ing o r changes to depots) over the period from 1970 t o 1976. Thus an individual Australian dairy factory 's a b i l i t y t o change product mix i n response t o market forces may generally be very l imited. The dramatic reduction i n the amount of bu t t e r produced s ince 1970-71 appeared t o be t he r e s u l t of the rap id r a t e ~f e x i t of bu t t e r fac tor ies and of general downturns i n throughput and not. t he r e s u l t of changes i n product mixes of continuing f ac to r i e s .

Large en te rpr i ses can more ea s i l y change product mixes i f they own f ac to r i e s which produce d i f fe ren t products. Presupposing t h a t t he necessary capacity i s avai lable and tha t f ac to r i e s a r e r e l a t i ve ly c lose geographically, milk a n be chal~nelled from one factory t o another as the need a r i s e s . This is l i k e l y i n the case of some propr ie ta r ies i n each S t a t e s ince some control a range of p lan t types. I n contrast , the large co-operative en te rpr i ses of Victoria and Tasmania a r e devoted almost exclusively t o the production of bu t t e r and its by-products. In the o ther S t a t e s t h e a c t i v i t i e s of co-operatives a r e spread over a wider number of products and a certai-n degree cf product f l e x i b i l i t y may be possible.

Large enterpr ises a l so have t he optjon of responding t o long-term changes i n the i 'elat ive p r o f i t a b i l i t y of manufacturing milk products by ratiollal i s i ~ ~ g f a c t ~ r i e s . Utilisation

Utj l i s a t i o n r>f avai lable dairy processing p lan t capacity i s i n large p a r t re la ted t o yearly seasorial f luctuat ions i n milk production. These f luctuat ions a r e amplified by the need to provide a manufacturing o u t l e t f o r the seasc3nal pesk i n production from farms tha t normally supply market milk. Plants are frequently s e t up t o be able t.o handle the aniouslt of milk produced i n t h s peak ~nontl~s; consequently, p lant f a c i l i t i e s a re under-uti l ised d i r ing a large pa r t of t he production year.

Table No. 13 s h w s the ~tlonthly l eve l of milk produced f o r manufacturing i n Auqtralici during 1974-75 and 1975-76. The data ind ica te t h e seasonal f luctuat ions +hat do occur, over the year, i n milk production and therefore indicate the prob3eni facing the milk processing sec tor i n making f u l l u t i l i s a t i o n of resources throughout the year. In Victoria, the production i n the lowest producing month i n 1974-75 was only 14% of

l t he production i n the highcs t producing month. Corresponding percentages fo r New South Wales, South Australia, and Western Austra l ia a r e 47%, 23% and 15% respectively.(5) The average f o r Austra l ia i n 1974-75 was 22%. High l eve l s of production i n each S t a t e occurred i n only four t o f i v e months of the year.

Infornation on the physical capacity of Australian dairy fac tor ies is l imited. Iiowever, it is possible t o r e l a t e monthly throughput of manufacturing m i l k t o the throughput achieved (by one o r more s h i f t s per day] during t h e peak leve l of production and to compute a

(S) Production f igures f o r Queenslsrrd and Tasmania a r e not provided j,n t h i s form by ABS.

Table No. 13

PRODUCT ION OF MANUFACTURING M ILK : SELECTED STATES AND AUSTRALIA La)

(' 000 Li t r e s )

S ta te Year Ju ly Aug. Sept. Oct. Nov. Dec. Jan. Feb. March April June

N.S.W. 1974-75 22 039 24 953 32 391 43 999 47 179 47 141 40 792 27 625 33 291 28 665 25 493 23 886 1975-76

(P ) 24 006 29 641 39 906 52 560 50 964 51 921 45 571 39 399 30 816 24 035 19 039 19 180

Vic. 1974-75 151 232 274 658 365 420 458 762 494 311 464 832 368 930 242 691 186 585 125 948 77 470 68 776 1975-76

@) 134 266 269 846 388 296 491 392 482 367 459 039 337 072 211 464 156 046 87 471 31 083 29 117

S.A. 1974-75 24 739 28 979 34 724 39 040 35 877 28 346 19 910 11 347 9 032 11 649 17 458 21 084 1975-76 I

@) 23 453 27 862 32 741 39 056 35 596 28 739 18 587 10 765 9 791 9 258 12 294 14 150 2 W.A. 1974-75 13 428 13 998 16 501 17 715 16 664 13 259 8 065 3 737 2 735 2 860 6 428 10 442

1

1975-76 (P) 13 448 14 661 17 131 18 522 15 798 12 682 6 500 2 872 2 051 1 271 5 206 9 762

1974-75 238 210 381 019 511 246 647 191 690 861 654 039 534 594 357 127 294 101 222 064 163 294 148 782 1975- 76

(P 1 228 668 397 155 555 591 702 850 692 844 662 363 506 003 327 579 259 Q42 165 367 96 498 93 354

-m -v-

(a] Production f igures f o r Queensland arid Tasmania a r e not provided i n t h i s form by ABS. (p) Pre iL~ ina ry .

C . = ABS, >PwZem.ilk Yrsduc?tion a d IMiZisation i n AustraZia (various i s sues ) .

percentage ' l eve l of u t i l i s a t i o n g on t h i s basis . (6) This def in i t ion of ' u t i l i s a t i o n t is somewhat misleading i n t h a t even with, f o r example, (a) optimal organisation of t he processing sector , (b) inter-regional and in te r -S ta te milk t ransfe rs t o take advantage of regional differences i n the timing of peak supplies, and (c) incentives t o farmers t o produce a more constant level of production over the year, some degree of gunder -u t i l i sa t iong would probably s t i l l occur and be desi rable , since seasonal f luctuat ions probably could not be eliminated completely. This def in i t ion of u t i l i s a t i o n therefore does not dis t inguish between two concepts. The f i r s t is t h e need f o r capacity t o be avai lable on an industry-wide bas i s t o meet seasonal var ia t ions i n regional milk supplies; the second is t h e ccipacity i n excess of tha t needed by the industry t o cope with these seasonal var ia t ions .

With these problems i n mind, Table No. 14 shows t h e e f f ec t of seasonali ty on factory u t i l i s a t i o n f o r the main bu t te r and cheese producers i n each S t a t e fo r the years 1974-75 and 1975-76. The calculat ions vary between S ta tes because of data l imita t ions (see Footnote 6). However, it can be seen tha t during t h i s period the leve l of average dairy plant u t i l i s a t i o n i n Austra l ia generally varied around 55%. During the lowest month of p m d i i ~ t i o n i n 1974-75, the l eve l of u t i l i s a t i o n of p lan ts i n South Australia f e l l t o about t he 14% l eve l and i n Victoria t o 12%.

'i'able No, 14

PERCENTAGE UTILISP.CION OF AUSTRALIAN DAIRY FACTORY

CAI'ACT'fY : Bk STATE : 1974-75 AND 1975-76

1974-7.5 1975-76 S t a t e - --p

Average Low Month Average Low Month --v

New South Wales 55 .S6 na 56.65 na

Victoria 55.72 11.91 55.94 20.89

Queensland na na 55.83 na

South Australia 55.68 14.29 51.91 12.24

Western Austra l ia 66.10 na 57.24 na

Tasmania 52.39 na 53.05 na - na, not available.

(6) The calculat ion of factory capacity i n each S t a t e was performed using one of two methods:

( i ) f o r New South. ;Vales and Tasmania, actual f igures f o r the capacity of each factory were supplied by t h e respective S t a t e Departments of Agriculture; or

( i i ) f o r Victor ia , South Australia, Western Austra l ia and Queensland capacity was assumed to be t h e peak monthly throughput i n 19 74- 75.

Monthly and annual levels of capacity were then computed f o r each factory, then weighted t o give a regional average.

Changes i n Factory Output

The general level of p lant u t i l i s a t i o n can a l so be reduced by a downturn i n t h e l eve l of milk supply over a number of years. This downturn can be ref lected i n many cases by decreasing leve l s of production i n individual f ac to r i e s over time.

Table No. 15 shows t h e trends i n t he l w e l of prod~rction of cheese and bu t t e r ( fo r equalisat ion) i n f ac to r i e s operating over t h e period 1970-71 t o 1975-76. Fif ty-four per cent of t he f ac to r i e s producing bu t t e r f o r equal isa t ion experienced downturns of more than 10% i n t h e l eve l of b u t t e r production s ince 1970-71; another 26% of b u t t e r f ac to r i e s experienced r e l a t i v e l y s t a b l e levels of bu t t e r production and only 19% experienced increases i n bu t t e r production of more than 10% over t h e 5-year period. New South Wales, Queensland and South Austra l ia had a very high proportion of bu t t e r f ac to r i e s which experienced decreases i n t h e level of bu t t e r production. Of the bu t t e r f ac to r i e s i n Austra l ia which experienced increases i n bu t t e r production, 46% were located i n Victoria.

A much la rger proportion o f cheese f ac to r i e s increased cheese production over the 5-year period. A t t h e nat ional l e v e l , 66% of f ac to r i e s producing cheese f o r e q ~ ~ a l i s a t i o n increased production of cheese, 14% reduced production and 20% had s t a b l e production.

Concl u s i ons

. Despite the dramatic reduction i n t h e number of bu t t e r fac to r ies , 54% experienced downturns i n t he l eve l of bu t t e r produccd i n t h e period 1970-71 to 1975-76.

. Given t h e poor outlook f o r bu t t e r on both t h e domestic and t h e in te rna t iona l markets, subs tan t ia l adjustment among bu t t e r f ac to r i e s is l i k e l y t o continue t o occur.

. A change i n t he level and mix of milk products produced t o move more i n l i n e with domestic requirements may require substant ia l adjustments pa r t i cu l a r l y among f ac to r i e s which previously produced bulk l i n e items f o r exports.

. Austral ian dairy f ac to r i e s generally produce only one main product and i ts complements and therefore may be qu i t e i n f l ex ib l e i n regard t o product mix. Based upon pas t experience, adjustments t o t h e reduced quant i ty of milk products demanded w i l l be primarily by factory ex i t s , but a l so by conversions i n to milk depots and spec ia l i sed casein o r SMP production.

. Dairy fac tor ies of necess i ty already face low leve l s of p lan t u t i l i s a t i o n during a large p a r t of t he year. Since un i t cos t s of production can increase subs tan t ia l ly with decreases i n t he l eve l of u t i l i s a t i o n , f u r t he r reductions i n milk supplies could have a s ign i f ican t e f f e c t upon processing cos t s .

. Increasing processing costs due t o reduced milk throughput, cost i n f l a t i on and other fac tors influencing costs prevent t he f u l l

Table No. 15

DISTRIBUTION OF BUTTER AND CHEESE FACTORIES OPEN I N 1975-76: BY CHANGE I N OUTPUT OF

BUTTER AND CHEESE FOR EQUALISATION BETWEEN 1970-71 AND 1975-76

New South Wales Victoria Queensland South Australia Type of Declin- Stable Increas-

Plant Declin- Increas- Declin- Increas- Declin- Stable Increas- ing (b)

- ing Stable ing Stable ing ing ing ing ing (a) ( c l

Butt e r fac tory 10 3 3 7 6 6 13 3 2 4 1 0

Cheese fac tory 2 1 8 2 2 5 0 2 6 2 2 5

Total 12 4 11 9 8 11 13 5 8 6 3 5

Western Australia Tasmania Australia a Type of Increa- 01 Declin- Stable Increas- Declin- Stable Increas- Declin- Stable Plant ing ing t ing ing ing ing

Butter f 'actory 1 2 1 2 3 1 3 7 18 13

Cheese fac tory 0 2 2 0 0 3 6 9 2 9

Total 1 4 3 2 3 4 4 3 27 42

(a) More than a 10 % decrease i n production from t h e 1970-71 t o 1971-72 average t o t he 1974-75 t o 1975-76 average. (b) Less than o r equivalent t o a 10 % increase o r decrease i n production. (c) More than a 10 % increase i n production.

flow-on t o farmers of ally ilicreascs i 11 mrket prices f o r m i 1 k products.

. Continued factory r a t i o n a l i s a t i o n and m o d e r n i s a t i o ~ ~ is required f o r a f i n a n c i a l l y v iab le and e f f i c i e n t da i ry i n d u s t r y - Modeinisation is necdcd t o f u r t h e r help counteract t h e e f f e c t s of cos t i n f l a t i o n while fac tory r a t i o n a l i s a t i o n and adjustmcrst nwst be i.n l i n e with The farm s e c t o r adjustment arid with the domestic and export requirements f o r milk products.

Appendix

FACTORY TYPE TABLES : DEFINITIONS USED

Two basic categor ies a r e dist inguished:

(a) Single Product Type Plants

Where one has a main product and i ts complements, e.g. condensory products o r dr ied products o r butterlskim milk/buttermilk powder, t h e category is f u r t h e r sub-divided i n t o :

- town milk p l an t s

p lan t s which supply pasteurised milk and possibly o ther r e l a t ed products such a s t a b l e cream and flavoured milk, but do no t engage i n fu r the r processing t o i c e cream o r b u t t e r .

- high value fancy product p lan t s

producers of products such a s yoghurts, cultured milks, t ab le cream, i c e cream, fancy cheeses, e tc . characterised by high value and small production volumes.

- cheese and by-products p lan t s

producers of cheese, producing high volume, non-fancy cheeses plus by-products such a s whey powder.

- bu t t e r and by-products p lan t s

producers of bu t t e r o f ten with SMP, WMP, BMP and casein.

- receival depots (not elsewhere included)

(Any of t h e other categories of p lan t can send milk t o other f ac to r i e s o r t o c i t y milk au thor i t i es . ) This category of p lan t is purely a col lect ion, cooling and bulking f a c i l i t y with no o ther function.

- other s i ng l e product type p lan t s

includes casein p l an t s , drying plants , condensories, i c e cream mix plants and any o the r p lan t with a s ing le production process no t included elsewhere.

(b) Multi-product Plants l

In t h i s case, several streams of production types occur i n t h e p lan t , giving several l i ne s of products with t h e i r associated by-products, e.g. butter/SMP and cheese, o r bu t t e r and i c e cream. The group i s divided in to two categories:

- plan ts associated with urban milk processing

where the plant i s es tabl ished to process high volumes of pas teur ised milk and uses its surplus milk t o produce bu t t e r o r fancy products. (Other categories of p lan t s may a l s o pasteur ise and d i s t r i b u t e small quan t i t i es of milk fo r local consumption without f a l l i n g i n to t h i s category.)

- other multi-product p l an t s

where the p lan t i s no t associated with urban milk processing.

R 7 4 / 2 5 1 9 ( 2 4 ) CAT NO 7 7 2 3 8 7 5