Fairfax has published an interesting article today on the explosion of “black market” baby formula sales to China, which has led to shortages across Australian supermarkets.
The situation is summed-up perfectly by the below chart, showing near exponential growth in sales, despite a fall in babies born:
And it appears that there is little interest in rationing sales for the domestic market, with the big supermarkets deriving too much profit:
A senior Woolworths executive has admitted the company pays mere “lip service” to enforcing its four-tin limit on infant formula, aimed at safeguarding supplies for Australian families…
Coles and Woolworths have faced a backlash from angry parents unable to buy their preferred brand of infant formula, while prices have surged based on overseas demand…
A senior Woolworths executive told Fairfax Media… “We put up the signs on the shelves about can limits and give lip service to enforcing it,” the executive said.
“Sales are worth way too much for us…
A2 chief executive Peter Nathan conceded that a large amount of his product sold in Australia ended up with Chinese consumers.
“The data doesn’t break out who the ultimate consumer is, but we know that a large amount of our domestic sales ends up overseas. I don’t think that demand is going to abate any time soon.
Meanwhile, the Federal Government unwilling to intervene:
Assistant Trade Minister Richard Colbeck said the government was reluctant to intervene because it was concerned it could undermine the prices Australian farmers were paid for their milk.
While it is unfortunate that new mothers are experiencing difficulty sourcing formula, the problem should not persist indefinitely.
Eventually, Australian producers will expand production to meet demand, as has occurred in New Zealand over the past decade, whereby dairy exports rose from around 5% of total exports to a peak of around 30% (see next chart).
Indeed, the “dining boom” to cater for China’s emerging middle-class has often been mentioned as a potential source of export growth for Australia, and as a way to diversify Australia away from mining.
Let’s make it happen.
