Season 2012/13 has been very challenging for dairy farmers. The combination of poor weather conditions, increased costs of major inputs, a high Australian dollar reducing export returns, lower farmgate milk prices, and the need to service debts incurred in surviving the prolonged drought until 2010 has placed significant pressures on most farmers. These factors have also impacted on milk production levels. With milk flow last season totalling 9.48 billion litres (an increase of 4.2% on the 2010/11 level of 9.1 billion), the expectations were for a rise of between 2 and 3% this season to around 9.65 – 9.75 billion litres. Production has in fact dropped. The latest production figures published by Dairy Australia, for the month of April 2013, show milk flow dropped in every State except West Australia that month totalling a reduction of 9.6% throughout Australia. This brings total production for the ten months of this season to a level 2.3% below the previous season. The position by State is: State Variation in April 2013 Variation on last season compared compared April 2012 (%) year to date (%) Victoria - 10.7 - 1.9 NSW - 7.2 - 0.9 Queensland - 7.6 - 5.8 South Australia - 11.5 - 4.6 Western Australia + 2.1 - 1.2 Tasmania - 9.3 - 3.6 Australia - 9.6 - 2.3 Based on this, Dairy Australia has revised its forecast total milk production this season downward to 9.35 billion litres, a drop of 1.4% on last season (Dairy Situation and Outlook – Summary Report May 2013). However, this forecast is extremely optimistic – production would have to have risen by over 4% in May/June to reach that 9.35 billion total. In fact production is more likely to drop by between 8 – 10% in those two months, giving a full 2012/13 season total production of between 9.16 and 9.18 billion litres, about 3% below the 2011/12 level. As always, the Victorian regional milk production figures show some interesting trends: Region Variation In April 2013 Variation on last season compared to April 2012 (% compared year to sale (%) Gippsland - 18.5 - 7.5 Northern - 1.0 + 4.6 Western - 13.1 - 1.9 Dairy Australia expect milk production to rise in the new 2013/14 season to a total Australian level of between 9.4 and 9.6 billion litres. That increasing trend is expected to continue, with Dairy Australia forecasting milk production in 2015/16 could be between 9.8 and 10.2 billion litres. The good news is that Dairy Australia and most agribusiness commentators are forecasting farmgate milk prices to rise in 2013/14. With a lower Australian dollar, world prices at strong levels and continuing strong international demand, the expectation is that dairy processors will announce season opening prices around $5/kg milk solids, about 16% higher than last season’s opening levels which averaged around $4.30/kg. One company, United Dairy Power, last week announced its new season opening price will be $5.80/kg milk solids. This is equal to the price announced in New Zealand by Fonterra which says its forecast farmgate milk price for 2013/14 is NZ $7.00/kg milk solids (equivalent to around $5.80 in Australian dollar terms). Prospects in international markets remain good. After months of consecutive rises, prices for all products on the GlobalDairyTrade auction on 15th May fell by an average of around 2%, but to levels that continue to be attractive. Observers will be watching closely the results of auctions this week to see the impact of improved weather conditions in New Zealand, and continuing unfavourably cold conditions in most of Europe. Expectations are that for the foreseeable future, prices will continue to be at strong levels, because of limited world stocks, unlikelihood of any significant production increases in the major producing countries, and continuing strong global demand for dairy products. Regularly the media reports strengthening demand in Asia and particularly China – one example – in the English Dairy Industry Newsletter, it was recently reported that “sales of yoghurt in China are set to explode, from virtually nothing on 2000 to 3.6 million tonnes in 2010 to an estimated 6 million tonnes in 2015, according to the new ‘World Yoghurt Market Report’ “. Similar reports appear frequently about demand in China for other dairy products, such as milk powders and infant formulations. No doubt the new season will bring its challenges. But it opens with some encouraging developments on the horizon.
Posted on: Thu, 06 Jun 2013 05:14:37 +0000
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