2017 is likely to be disappointing for milk powder manufacturing, with an anticipated revenue decline of 12.2 per cent and ongoing concern about the global price of milk powder, according to research by IBISWorld.
Revenue in the sector is forecast to fall 12.2 per cent during 2016-17 to $757 million. This follows on from declines of 35.8 per cent and 22.2 per cent in 2014-15 and 2015-16, respectively.
“The Milk Powder Manufacturing industry heavily relies on export markets, which account for approximately 90 per cent of industry revenue. Consequently, fluctuations in global milk powder prices play a major role in the industry’s performance. Global milk powder prices collapsed during 2014-15 amid concerns about excessive increases in milk powder supplies,” said IBISWorld Senior Industry Analyst Nathan Cloutman.
Prices did not recover during 2015-16 and are expected to only make a minor recovery during 2016-17. Furthermore, local producers are anticipated to reduce milk powder production during 2016-17, with low prices discouraging production. These factors will likely depress industry revenue during 2016-17.
Sugar Manufacturing
Elsewhere in the food & beverage sector, sugar manufacturing is likely to grow strongly this year. Revenue is forecast to jump 19.9 per cent during 2016-17 to reach $3 billion. Local sugar production is forecast to rise 3.7 per cent during 2017, due to an expected increase in planted area for sugar cane.
Increased production typically places downward pressure on prices. However, the Sugar Manufacturing industry’s reliance on export markets (which account for about three-quarters of the industry’s revenue) means that local prices tend to follow global sugar prices.
“The world sugar price indicator is projected to increase 20.1% during 2016-17. This is because global sugar consumption is expected to exceed global sugar production for the second year in a row, reducing world sugar stocks for the second year running. As the world sugar price indicator is expressed in US dollar terms, the projected depreciation of the Australian dollar during 2016-17 is expected to increase the world price of sugar (in AUD terms) even further during the year, boosting returns for local sugar manufacturers,” said Cloutman.
Grain Growing
Revenue for the Grain Growing industry is forecast to fall 5.5 per cent during 2016-17 to $13.3 billion. Local prices of key grains barley and wheat are forecast to fall 25.8 per cent and 15.6%, respectively, during the year. This is due to falling global prices, with the world wheat indicator price expected to decrease 13.8% in 2016-17.
“Record world stocks of many grains, caused by favourable growing conditions in many key grain producing countries (such as Canada and Russia) have created excess global supply, which is likely to place sharp downward pressure on grain prices during the year,” said Cloutman.
Looking more broadly at the whole economy, 2017 is likely to be characterised by growth in Road and Bridge Construction, Oil and Gas Extraction, Data Storage and Child Care Services.
While these industries are preparing for a bumper year, others may have to adjust to new commercial situations or limit their expectations for growth, including operators in Heavy Industry and Other Non-Building Constriction, Multi-Unit Apartment and Townhouse Constriction, and Mineral Exploration.
