International dairy commodity prices have staged a significant recovery in recent months, as global supply and demand slowly return to a more balanced outlook, according to Dairy Australia’s latest Situation and Outlook report.
However, this season’s low farmgate prices continue to squeeze farmer margins in southeast Australia, impacting national milk production.
The October Situation and Outlook has revealed decreased milk production from Australia, New Zealand and Europe is helping ease the downward pressure on global commodity pricing caused by the oversupply issue of recent years.
Dairy Australia senior analyst John Droppert said Australia’s milk production was forecast to drop 5% over the full season for 2016/17, as a response to low milk prices, tight margins and the ongoing impacts of flooding and excessive rain in some regions.
“The pain that many farmers in southeast Australia experienced last season, and the ongoing challenges around margins will prove significant obstacles for some processors in securing supply in the short term,” Mr Droppert said.
“Overall milk production will remain constrained in southeast states as farmers defer investment and focus on management to breakeven points, and conserving equity where margins are negative.
“The first two months of this season has seen significant year-on-year declines in national milk intakes averaging 9%, but the impact on the overall national milk volume is expected to moderate as the season progresses and the benefits of good rainfall (excluding flood and excessive rain damage) and lower costs for feed, fertiliser and water accrue for farmers across the nation.”
