Dairy in Australia Dairy is one of Australia’s most important rural industries, producing about 9.4 billion litres of milk annually and directly employing approximately 43,000 people. The majority of milk production occurs on the south-east seaboard in Victoria, New South Wales, and Tasmania. Australia exports approximately 38 per cent of its milk production which was valued at $2.2billion in 2014/15. A large proportion of exports are in the form of value-added products such as cheese, butter, ultra-heat treated milk and milk powders. Australian dairy is exported around the world. The industry has struggled to perform over the past five years. Adverse climatic conditions, fluctuating operating costs, volatile global demand and shifting global prices have presented challenges for the industry. Changing consumer preferences in the domestic market have also influenced industry operators, which have been forced to alter their product ranges in response. Industry revenue is expected to decrease at an annualised 2.7% over the five years through 2015-16, to total $6.1 billion. Export revenue is also anticipated to decrease over the period, as plummeting prices from the past two years take their toll. Despite these challenges, the past five years have not been all bad for the industry Resources Questions - Assume that when the price paid to farmer-suppliers dropped from $6 every kilogram of milk solids to just $4.75 a kilogram, equivalent to as little as 35c a litre of milk, supplies from the farmers reduced by 1%. Calculate the price elasticity of supply for dairy. Draw relevant Graphs. If the current trend with prices was to continue over a longer term what changes would you expect? Explain using economic theory and include relevant graphs.( 5 marks) - Assume that the industry has now received a substantially large export order to Taiwan to supply clients in that country from 2017 through to 2020. How will this affect the supply and price paid to the dairy farmers? Clearly indicate any assumptions you may make, refer to economic theory and draw relevant graphs to support your answer.(5 marks) - What alternative strategies could Fonterra and Murray Goulburn undertake in regards to pricing? Show evidence of your research and understanding of Economic Theory (5 marks) - What type of market structure is the market for dairy in which farmers supply the supermarkets through an intermediary? Explain why with reference to relevant economic theory. What are characteristics of this market structure? ( 5 marks) Part B 15 marks By conducting preliminary research that ensures you have access to relevant countryspecific economic data, select a country to study the nation’s economic health. Ideally you may select your country of origin if market and economic data is available for you to conduct the necessary research online. Write an essay, not exceeding 750 words that analyses the health of the nation’s economy. Your analysis should be based on GDP changes and shifts in economy through the period 2008 to now, relevant key economic indicators including population and employment, the relationship between key indicators, and relevant global, regional and incountry events and influences on the nation’s economy. (15 marks) Part C 5 marks Do not forget to include a reference list for any sources apart from lectures or tutorials. You also need to include in-text references. These will count for 5 marks. A referencing guide is available on the portal under assessments.
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