Prices for butter, cheese and whole milk powder are set to decline this financial year, however skim milk powder is set for a minimal rise.
That is according to forecasts by the Australian Bureau of Agricultural and Resource Economics and Sciences, which were presented by ABARES economist Andrew Cameron at the ABARES Regional Conference in Shepparton on Wednesday.
But it is not all bad news for farmers, despite farm gate milk prices being determined mostly by the export market, as a slight increase is also expected.
‘‘Economic growth is expected to translate into higher dairy demand but unfortunately we think much of that increase in demand will be met by increased supplies of milk coming out of New Zealand, in particular, and the United States — so that’s going to place downward pressure on most of the primary dairy product prices over the coming six to nine months,’’ Mr Cameron said.
‘‘We expect prices for butter, cheese and whole milk powders to fall in 2018-19 and skim milk powder to rise by a small amount.
‘‘So, all other things being equal, that would be typically unwelcome news to Australian dairy producers and processors as Australian milk prices are determined primarily by export market prices.
‘‘Fortunately there are a couple of positive factors at play in Australia’s case and we expect that’s going to provide an offset to those (negative) factors.
‘‘The most significant and obvious one is the floating dollar doing what it’s supposed to. A falling Australian dollar is expected to support the export competitiveness of Australian dairy products and the Australian farm gate milk price.
‘‘Another supporting factor is competition among processors to shore up their suppliers after a few very large and well publicised acquisitions in the dairy sector and investment in processing capacity, so we are forecasting a very small rise in farm gate pricing in Australia this financial year.’’