Australia dairy exports withstand price hikes-trade

Skim Milk Powder Demand for Australia's dairy exports, worth A$3.6 billion ($3.4 billion) a year, remained strong despite price rises of up to 50 percent in some markets, industry body Dairy Australia said on Wednesday.New demand for dairy products continued to emerge in Asia, fuelled by population growth, rising incomes and a swing to Western eating preferences, while price rises were not affecting consumption in oil-rich countries of the Middle East, it said.Australia is one of the world's biggest exporters of butter, cheese and skim milk powder, after New Zealand and the European Union. Asia is Australia's largest market for cheese, butter and skim milk powder, while the Middle East accounts for around 13 percent of sales.Dairy prices have been rising strongly around the world, because of a combination of the Australian drought, which has limited production, and strong global demand.Prices had risen by around 15 percent in Asia and by between 20 percent and 50 percent in some Middle Eastern markets, Dairy Australia said.In the Middle East, price increases had produced some consumer outcry and attempts by governments to control retail prices, Dairy Australia analyst Norman Repacholi said in a statement."However, the increases have been accepted on the basis that prices for all goods and services are increasing -- and some by much more than dairy," he said.Price rises in Asian markets had mostly produced no significant consumer impact, with new demand seen continuing in the long-term, Repacholi said.Australian dairy products had a favourable perception and position in export markets but further expansion may be limited by availability of supply, distance and competition from countries which had a geographical freight advantage, he said.The Australian Bureau of Agricultural and Resource Economics recently forecast that the value of Australian dairy exports would jump by 50 percent to A$3.6 billion in 2007/08, from A$2.4 billion the year before.This was based on a sharp rise in dairy prices, which the bureau attributed to steady growth in global demand and slower growth in supplies, partly because of Australia's worst drought in 100 years.The bureau forecast a slight rise in the volume of Australian butter exports, to 82,000 tonnes in 2007/08 from 81,000 tonnes the year before. But the volume of cheese exports was forecast to fall to 180,000 tonnes from 213,000 tonnes, while the volume of skim milk powder was forecast to fall to 145,000 tonnes from 164,000 tonnes. ($1=A$1.05) (Reporting by Michael Byrnes)