The Country 01/05/25: Michael Harvey talks to Jamie Mackay

RaboResearch senior analyst discusses the recently released RaboResearch dairy report, which looks at a new Indonesian school milk programme and the opportunities it could create for the NZ dairy sector. 

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Episode Transcript

Speaker 1 (00:00):
Michael Harvey is based in Sydney. He's Rabobank's senior dairy
analyst and Michael, Indonesia's going to introduce effectively what we
would know as milk and schools program And the good
news for US as a dairy exporting nation is they're
going to try and get milk down the throats of
sixty million students. What does that mean for us.

Speaker 2 (00:23):
Jamie, thanks for having me. Yeah, Look, school milk programs,
as you said, they're not new. We had one here
in Australia back in the fifties, a bit bore before
my time. But I think it's a positive reminder that
you know, dairy is a veryrial nutritional product that governments
around the world see is an important part of the diet.
And that's fundamentally what's driving this most recent government policy,
a broad based increase in the role out of our

(00:46):
school milk program to sixty million students, but also a
number of pregnant mums and expecting mums in Indonesia as well,
So that in itself presents this potentially enormous increase in
the size of the white milk market in Indonesia. Now,
this question around whether they'll be able to do it
as successfully as they can. But ultimately, if they are
able to roll it out as extensively as they're thinking,

(01:08):
it's going to create a market increase of around two
billion leaders or more of white milk consumption in Indonesia.
So that itself is the opportunity for a growing white
milk market in Indonesia. And then it becomes a question
of product mix. What you know, what actually product does
that look like? Where do they source the milk from?
Do they actually need to import some of that product?
So that's the question there, But it's an enormous opportunity

(01:29):
if they can successfully roll this out.

Speaker 1 (01:32):
Yeah, So as it stands at the moment, And apologies
if you've already given this. I was trying to read
something and listen at the same time and I can't
multitask Michael. So a good portion of their milk is
already imported.

Speaker 2 (01:45):
That's right. I mean Indonesia are what we would classify
as a net importer, so they're an import deficit economy.
It's a growing market because of the macro demographics that
are at play there. So they import over two billion
leaders and look on a liquid milk eqivalent base every year,
and exporters like New Zealand are certainly very heavy in
that market, so that that itself, it's important trading partner already,

(02:07):
this presents a new opportunity as they grow that white
milk market. But what I mean clearly what we're watching
in all this is one there's also a government policy
that's that play here in Indonesia where they want to
try and boost domestic milk production to cater to that
growing market for white milk for school milk, and there's
questions around how that's going to be achieved, given you
they are already a net importer of dairy products. But

(02:28):
potentially it creates opportunities to supply feed and equipment and
heifers and so forth into that market as they build
the domestic kurd. But there's also likely to be some
opportunities just to export dairy ingred in some products into
that market as that market grows. So there's some a
few layers of opportunity, a few moving parts around how
it might look like, and it's clearly going to be

(02:48):
a multi year sort of program as they roll.

Speaker 1 (02:50):
Without well historically New Zealand has said, and I know
this because I'm reading it from your press release, Michael
excellently composed too. I might add, historically New Zealand we
had a large dairy coal heifer export business, exporting on
average ninety thousand head annually. However, a ban was implemented
in twenty twenty three following a several maritime incidents, including

(03:13):
one very tragic one. So that opportunity as it stands
at the moment for New Zealand farmers is not there.

Speaker 2 (03:21):
No, that's right. That's something we're watching quite closely because
there is this ambition to significantly increase domestic production in Indonesia.
With that there will be a greater need to import heifers.
We're starting to see a few volumes trickle out of
Australia into that market. And it's important timing because, like
you said, New Zealand at an export banned place. Generally speaking,

(03:42):
for both Australia and New Zealand, over a long period
of time, a lot of their hefer trade indu Asia
has been into the China market. That market's been very
very weak recently because they're actually going through herd reduction.
So this potentially creates an opportunity if there was a
if there was a shift in government policy. But what
you're also seeing in Indonesia is a recogn that clearly,
whatever happens, they're not going to be able to source

(04:02):
all the heppers out of this part of the world directly,
so they're actually kind of open up markets and get
protocols in place to be able to source heppers out
of other regions like South America. So it's one of
the layers that we're keeping a close eye on.

Speaker 1 (04:14):
Hey, just to finish on we've got duck shooting or
duck hunting. I've got to be politically correct season to
look forward to here in New Zealand this weekend. I'm
not sure whether you're better off or worse off than us.
You've got an election to look forward to. Have you
early voted?

Speaker 2 (04:29):
I haven't where we make a habit of wandering down
with the dog to the local school to get a
sausage and cast their vote. Yeah, so it's a I
guess it's an important date on the calendar for Australia.

Speaker 1 (04:39):
Yeah, Albanize is going to get back, isn't he.

Speaker 2 (04:44):
The Poles are looking that way. Yeah, I'm certainly not
my expertise. I'll stick to my lanes. But the Poles
are certainly reading that way. Absolutely.

Speaker 1 (04:50):
Hey Michael Harvey out of Rabobanks, Sydney office. Thank you
very much for your time.

Speaker 2 (04:55):
Thanks thanks having me