Australia's milk volumes in both December and January exceeded expectations, with December seeing the first year-on-year increase in milk production in 18 months, but Dairy Australia is still expecting a drop of between three and five per cent over the whole 2019-20 season.
That is according to the industry body's March Situation and Outlook report, which also said milk production had declined by 3.7 per cent for the 2019-20 year to date, mainly due to a difficult start to the season.
Supply and demand of dairy products is yet to be materially impacted by the developing coronavirus outbreak, although most dairy commodities prices have trended lower in recent weeks.
Face-to-face trade and business development activities have been widely disrupted, as has shipping and distribution, while the effect on underlying demand is uncertain.
Dairy Australia industry insights and analysis manager John Droppert said many farmers have been able to capitalise on favourable weather conditions and continued high farm gate prices, with the bulk of the milk production recovery centred on Gippsland and Tasmania.
“A recent recovery in national milk production, together with substantially more favourable weather conditions across many dairy regions, have been positive developments at a time of strong local and global dairy market fundamentals,” Mr Droppert said.
“These have come amidst a tumultuous backdrop combining global disease with local drought and bushfires.
“Despite relatively stable supply and demand conditions, international trade faces the dual challenges of the ongoing African swine fever outbreak, and still-escalating COVID-19 crisis.”
Dairy Australia continues to forecast the national milk production will drop to between 8.3 billion and 8.5 billion litres for the full 2019-20 season.
This incorporates the potential for further improvements in the event of a favourable autumn, but also recognises the patchy nature of the recovery and ongoing challenges in many areas.
See more in Country News next week.