The Australian dairy industry is expected to improve this year with milk production up amid favourable seasonal conditions and good farmgate margins.
In a recent report, Rabobank said that Australian milk production increased 2.5 per cent year over year to 5.35 billion litres from July last year to January this year.
“With milk prices remaining elevated, expectations are that new season pricing from July 1 will be margin-supportive,” Rabobank senior dairy analyst and report co-author Michael Harvey said. “And there is plenty of homegrown feed in storage, and purchased feed is affordable.”
Rabobank forecasts the Australian milk supply will increase 2.6 per cent in the 2023/24 season ending 30 June, with growth continuing into next year in the range of three to four per cent.
“The financial health of Australian consumers is anticipated to improve as the year progresses, wages increase, tax cuts kick in and inflation normalises. And there are also potential interest rate cuts on the horizon,” Harvey said.
The report noted that Australian dairy production, especially milk, whole milk powder, and butter oil, was down last year, but the gap between local and offshore farmgate milk prices has narrowed.
However, Rabobank added that while global milk prices have improved, dairy farmers worldwide continue to face margin challenges.
Geopolitical conflicts such as those in Ukraine and the Middle East, and elections in key dairy regions such as the European Parliament elections in June, US presidential elections in November and New Zealand’s new government last October are also contributing to dairy price movements.
“After two consecutive quarters of weaker supply, a firmly bullish price response would typically have materialized,” Harvey said. “However, with global buyers’ current stock levels and broader economic worries offsetting lower milk volumes, the supply and demand balance is different this time.
“Looking ahead, we see increasing evidence that demand is on the upswing, with recessionary fears abating in some countries and a modestly-improved economic outlook,” he concluded.
This story first appeared on our sister publication Inside FMCG
