Northern Victorian dairy farmers have recovered from a difficult start to last season, with milk production jumping eight per cent to the end of last year according to a new report.
Dairy Australia’s February Situation and Outlook report, released last Wednesday, found that Australia-wide milk production had also experienced a bump of three per cent in the first half of the 2017-18 season.
The report points to farmers finishing this season in better shape than last year but warns increased Northern Hemisphere milk production could mean challenging times ahead and downward pressure on milk prices.
Slower milk production in New Zealand and good import demand have helped support commodity prices in the short term, but the fundamentals point to significant risk for prices in the months ahead.
The report also outlined considerable changes in milk processing and manufacturing in the region, with Murray Goulburn closing the Rochester plant in January, a contrast to the high level of investment other processors have made in the region.
Australian Consolidated Milk has announced plans for a greenfield milk processing facility in Girgarre, Freedom Foods has announced further upgrades and expansion at its UHT facility in Shepparton and Fonterra has committed $125million to expand production at the newly rebuilt Stanhope cheese factory.
Dairy Australia senior industry analyst John Droppert said a number of processors had demonstrated confidence in the industry’s long-term prospects.
‘‘The challenge for those processors will be in how they support and grow a profitable milk supply base to realise the potential of their manufacturing footprints while their competitors battle to retain their existing supply base,’’ he said.
‘‘Amidst the contrasting short and medium-term market signals, any inducement to produce more milk or retain existing suppliers will need to account for risks that remain in the global market.’’
Northern Victoria farmers also received some relief on the commodities market, with water prices averaging $75/Ml, down 56 per cent on the same time last year and almost a third on the prices seen five years ago.
The dry start to spring led to a boost in water trades in northern Victoria with trade volumes increasing 93 per cent on the previous year to 574000Ml.
In December, after a few months of above-average rain, trading fell 27 per cent on 2016 levels to 161000Ml.