With tariffs on dairy products under the Thailand-Australia Free Trade Agreement (Tafta) set to be eliminated in 2025, Wangnamyen Dairy Cooperative, the owner of Wangnamyen and Q-Life brands, has beefed up its investment in preparation for higher competition from imported products from Australia and New Zealand.
Atthasit Surakul, senior manager of Wangnamyen Dairy Cooperative, said the cooperative has invested about 1 billion baht over the last few years to upgrade its powdered milk factory and expand the factory's production capacity.
The cooperative's factory is the first one in Asia to produce DHA-Omega 3 powdered milk under a partnership with an Australian partner, for export to China and Europe.
Founded in 1987, Wangnamyen Dairy Cooperative is located in Wang Somboon district, Sa Kaeo, whose shareholders are mainly dairy farmers in the province.
Its business focuses largely on buying raw milk from members and milk processing. It now buys 200 tonnes of raw milk per day from farmer members.
The cooperative has 750 members with 40,000 dairy cows.
It also owns raw milk purchasing centres, a dairy feed mill, health care services for cows, a rice mill, dairy cow medicine, a farm equipment store, a convenience store, a gas station, restaurants and food courts.
"We have been busy strengthening our business over the last few years ahead of the dairy market's liberalisation. The factory helps the cooperative to effectively manage raw materials, particularly during oversupply. Value-added products also increase the cooperative's revenue and income for dairy farmers," said Mr Atthasit.
The cooperative produces 500 million boxes of UHT milk a year and most UHT milk products are exported to neighbouring countries, especially Cambodia because the province is adjacent to the border.
He said the cooperative is in talks with a Chinese business operator to produce powdered milk under an original equipment manufacturer (OEM) contract for export to Cambodia, Laos, Myanmar and Vietnam markets.
Atthasit Surakul, senior manager of Wangnamyen Dairy Cooperative, with the cooperative's products
The cooperative now produces OEM milk products for many international brands such as Dumex and Ovaltine.
Mr Atthasit said the factory's upgrade provides a good opportunity to export more Thai milk products during the pandemic to China and Europe.
The cooperative reported fetching total revenue of 3.5 billion baht last year.
"With the market fully open to Australian and New Zealand dairy products in 2025 under the free trade pact, we remain worried about small-scale farmers and their competitiveness against imported products," he said.
"The Thai raw milk price is 19 baht per kilogramme, while the Australia and New Zealand price is 12 baht per kg. With zero import tariffs, we're afraid imported products from Australia and New Zealand may be dumped into the domestic market."
Mr Atthasit suggested Thai farmers rev up their competitiveness by increasing efficiency and investing more to expand their farm size; increasing the number of dairy cows; applying automation tools and machinery; and improving their animal health standards.
He called on the government to raise awareness among farmers over the impact of a possible flood of imported dairy products and provide incentives and know-how to empower local farmers and operators to stay competitive once the market is fully open.
Tafta came into effect on Jan 1, 2005. The agreement calls for the liberalisation of trade in goods, services and investment, as well as for cooperation in overcoming obstacles to trade caused by non-tariff measures, such as restrictive sanitary and phytosanitary regulations and anti-dumping actions.
The agreement is meant to expand two-way trade in goods and services and increase investment on both sides, as well as strengthe the relationship between the countries.
Australia and New Zealand eliminated import tariffs for all items from Thailand in 2015. Thailand agreed to cut tariffs on imported goods from New Zealand on a gradual basis and waived tariffs for sensitive products such as tea, coffee and milk from 2025.
Two-way trade between Thailand and Australia amounted to $14.2 billion in 2019, down 14.8% from a year before, with exports making up $10.2 billion (-5.07%) and imports $3.95 billion (-32.7%).
Two-way trade between Thailand and New Zealand in 2019 totalled $2.28 billion, down 4.41%, with exports contributing $1.54 billion (-7.3%) and imports $735 million (+2.29%).
According to the Commerce Ministry's statistics, Thailand shipped dairy products and processed milk worth $382 million in export revenue in the first eight months of this year, a rise of 7.9% from the same period of last year. Key products included UHT ready-to-drink milk, yoghurt and plain milk.
Thailand is the leading dairy product and processed milk exporter in Asean, and the 10th largest exporter in the world. In 2019, dairy products and processed milk exports fetched Thailand $536 million, up 12% from the previous year.
Key markets included Asean, which represented 82.7% of total exports, China, Hong Kong, Japan and Europe.