BRAZIL and its emerging dairy industry has been labelled one of Australia's biggest threats.
The concern was aired at a recent Australian dairy talkfest, DairyLive, a national hook-up of farmers and key players in the dairy industry.
Industry leaders cited Brazil's low-cost pasture-based production, milk production growth and expansion on the global export market as reasons to keep an eye on the South American country when it came to the future of the world dairy commodity market.
Dairy Australia's international industry analyst, Michael Harvey, said that while Brazil had been more active on the world market in the past five years, and now accounted for 5 per cent of world trade, "they are not competition our industry can't compete with".
"They are not significantly in any of our markets," he said.
"Little bits of trade are building up in Asia, but we are talking minuet amounts at this stage."
Referring more to it as a "competitor" Mr Harvey said Brazil had been described as the "sleeping giant" of the dairy sector.
Brazil produced 30 billion litres of milk from 21 million cows last year.
Of this, 150,000 tonnes of milk product hit the export market, worth an estimated US$544 million.
Brazil's major markets are Venezuela, Argentina and the African region, and its major products are condensed milk and wholemilk powder.
But Brazil still has a long way to catch up to the value of Australian exports, which tip the scales at US$2.1 billion.
And, like the rest of the world, Brazil has not been immune from the rapid deterioration in global commodity market conditions.
"There are emerging concerns about production levels in the second half of 2009 due to (the) high cost of production combined with the recent decline in farmgate milk prices," Mr Harvey said.
"Already this year, a slowdown in production growth, coupled with rising local demand, has seen dairy exports fall.
"In the first half of 2009, (Brazilian) dairy exports (were) down by 40 per cent."
Challenges for Brazilian dairy farmers include the high price of feed and fertiliser and some of the highest interest rates in the world.
In terms of market expansion, Brazil's large domestic market could possibly swallow future production.
"They have an enormous potential to grow and an enormous potential to consume that growth," Mr Harvey said.
However, looking ahead to global opportunities, Australia was in the box seat with its reputation for high-quality, consistent product, Mr Harvey said.
