DESPITE global dairy consumption growing by up to 2pc a year, international prices were likely to remain stagnant for the next few years, maintaining pressure on the domestic front, Dairy Australia general manager Mike Ginnivan said.
And because about 85pc of the domestic price was determined by the export price, any chance for profitability gains would come through increased innovation and farm productivity.
"How many of you are sick of hearing that you need to become more efficient?" he asked the Dairy Information by Demonstration day crowd.
"It is the reality that increased productivity is one of the few areas pre-farmgate where you can have an influence on the level of profitability."
He said increasing productivity was not about farmers working harder and longer.
"It's a whole-of-industry concern," he said. "From a Dairy Australia position, we need to offer you technologies in a format that are more easily adopted on the farm."
Dairy Australia will direct $17.5 million into this goal over the next four and a half years, including a short-term injection of $4.5m to a program called Dairy Moving Forward.
Mr Ginnivan said Australian milk production was about 10 billion litres during 2002/03, down from 11.2bL in 2001/02.
This was due to a lack of recovery from the drought.
"There is a rule of thumb that for every 100mL you lose as a consequence of lack of production or lack of supply, it costs about $10m to $15m in earnings before interest and tax," he said. "When you consider that we're producing 1bL less, that's $100m gone from the industry."
Rabobank food and agribusiness senior manager, Reetica Rekhy, said the growth in world demand for dairy products between 2003 and 2007 was expected to be 1.6pc a year, which was equivalent to the normal growth in production in Australia and New Zealand.
"About 55pc of Australian dairy production is exported and given the nature of world markets, future growth is likely to occur from targetting new markets," she said.
China was likely to be one such area.