Improving picture for Dairy Farmers

By: "Farm Tender" News
Regenerative Ag & Carbon Farming News
Jun 19, 2019
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Dairy Australia’s June 2019 Situation and Outlook report points to an improving picture for dairy farmers, after a challenging season of sustained dry conditions have impacted national milk production, farm profitability and farmer confidence.

Despite continued higher costs for key inputs like grain, hay and water, Dairy Australia sees a better outlook for the new season starting on 1 July. Global commodity markets remain well balanced, supported by a 3.2% increase in global dairy demand in the past year and growth in key markets such as Greater China and South-East Asia.

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Domestic dairy consumption in Australia also remains robust, with per capita consumption amongst the highest in the world. Supermarket sales of major dairy products continue to generate value growth for the industry, with dairy spreads and cheese the best performers growing 7.3% and 4.9% respectively. Deli cheese continues to grow in popularity, accounting for 8.1% of total cheese sales.

Dairy Australia senior industry analyst John Droppert said Australian dairy farmers are reaching the end of what has been an exceptionally challenging season, but that positive signs were emerging.

“Positive domestic market trends, stronger global markets and a weaker Australian dollar have supported higher farmgate pricing this season and look set to deliver further increases over the next 12 months.

“Surging input costs have however, outweighed improved farmgate pricing, and milk production will likely remain under pressure.

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“Higher pricing will provide opportunities if enough rain falls at the right time and pushes grain, hay and irrigation water prices down,” Mr Droppert said.

Dairy Australia’s forecast of a 7-9% decrease in national milk production to between 8.45 and 8.65 billion litres for the current season remains unchanged. This reflects a significant reduction in the national herd and farmers reducing herd sizes due to drought and increased costs. Dairy Australia predicts a further drop in milk production of between 3-5% to a total of 8.1 to 8.3 billion litres in the coming season.

Dairy Australia has also published results of its annual National Dairy Farmer Survey in the report, which highlights confidence levels of 800 dairy farmers across all dairy regions. Conducted in February, the survey shows only 34% of farmers feel positive about the future of the dairy industry, compared to 47% last year and 53% the year before.

“This is the sixth consecutive year of declining sentiment nationally and a majority of farmers now feel negative about the future of the industry in all dairying regions with the exception of Tasmania,” Mr Droppert said.

“This is to be expected given the difficulties of recent years and should tick upwards if better conditions translate into improved profitability.

“Farmers feel more confident about their own operations and 45% are positive about the outlook for their businesses.” He added that a smaller survey sample conducted in April showed an increased level of confidence, reflecting a minor improvement in the farmgate price at that time, supermarkets increasing the price of $1/litre private label milk and improved weather conditions in some regions.

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The challenges and opportunities for the broader sector are also of critical importance to the industry and are being addressed through the development of the Australian Dairy Plan. Peak industry organisations Dairy Australia, Australian Dairy Farmers, Australian Dairy Products Federation and the Gardiner Dairy Foundation are supporting the development of the plan.

Last month, Dairy Australia’s analysis team contributed to a report on the state of the dairy sector, to support the discussions at Australian Dairy Plan industry consultation workshops across the country. The Australian Dairy Situation Analysis report provides an overview of key issues and conditions across a range of areas including farm profitability, people, skills, industry structure and competitive position.

The Australian Dairy Plan is focused on defining key industry priorities and delivering transformative and positive change for dairy over the next five years and beyond. It will report later this year. A copy of the Australian Dairy Situation Analysis report can be downloaded at www.dairyplan.com.au.

Dairy Australia’s Situation and Outlook report is released three times a year and provides analysis and insights into the latest national and international market trends in the dairy industry, as well as up-to-date statistics and facts. A copy of the June report can be downloaded at www.dairyaustralia.com.au.