Livestock

Global milk supply downward trend should see better farmgate prices

By Country News

The slowdown in global milk supply growth has ‘‘set the stage’’ for a recovery in milk prices for dairy producers around the globe, according to a visiting North American dairy expert.

But for Australian farmers it may be easier said than done.

A keynote speaker at the recent Australian Dairy Conference in Canberra, Rabobank’s global dairy strategist Mary Ledman said the current supply deficit was likely to be a feature of global dairy markets into the more medium-term, as consumption growth is pegged to rise at a fast rate and challenge supply growth to keep pace.

‘‘Our modelling of dairy supply and demand out to 2023 suggests there could be a global trade deficit of 4.4million tonnes (milk equivalent) in five years’ time,’’ Ms Ledman said.

But these fundamentals bode well for the global market outlook, she said, with the milk prices of 2015 to 2018 likely to become the ‘‘new norm’’.

That said, prices in 2017-18 had been tempered by intervention stocks in the European Union, and we have already seen the impact of that ‘‘big bang’’.

Ms Ledman, who has been analysing the dairy market for more than three decades, said there had recently been a change in the big actors on the global dairy stage — with Europe now accounting for 30 per cent of global production, the United States 20 per cent and Australia and New Zealand (combined) five per cent.

‘‘As such, what happens in Europe, and the magnitude of any change in European production, has a big impact on global trade,’’ she said.

‘‘For example, if EU production is up by one per cent, that is basically the same as production rising by five to six per cent in Australia and New Zealand.’’

Rabobank Australia senior dairy analyst Michael Harvey said the recovery in global prices should flow into better local farm gate prices.

‘‘That said, the local dairy sector faces a number of headwinds,’’ Mr Harvey said.

‘‘The biggest challenge facing the industry is the decline in its milk production.

‘‘With production at two-decade lows and with a slow recovery in Australian milk production forecast, we are not likely to have more milk to export.’’