Speaking at a dairy event in Cohuna on June 6, Rabobank senior dairy analyst Michael Harvey said despite a strongly performing domestic market, the Australian milk price was still impacted by the global market.
The effects of an increase in global milk supply, soft demand and imports from China at low levels have been buffered to a degree by the domestic market, with Saputo opening at $9/kg milk solids and other processors quick to follow.
The opening milk price is slightly down on last year’s record opening price of $9.50/kg MS.
“In years gone by a global downturn would have had a bigger impact on pricing but it has been buffered by a strong performing domestic market,” Mr Harvey said.
“A five to 10 per cent fall from record prices is a good result and should still deliver profitability.”
Mr Harvey said a weak Australian dollar and aggressive recruitment and retention strategies by dairy processors had again created an extremely competitive market for milk supply.
He said suppliers should be able to budget for a season of healthy productivity and the opportunity for long-term investment.
“Lower feed and fertiliser prices will support 2023-24 margins, however, access to quality labour and energy prices will remain an issue.
“An Aussie dollar trading under 67 cents [US] compared to a 10-year average in the mid-70s also contributes to better returns.”
Mr Harvey hopes buoyant prices will see some stability return to the industry, especially when it comes to the number of farmers exiting the industry.
“Consolidation is always challenging and can become an industry problem if it goes too far.”
Having been involved in this space for more than a decade, Mr Harvey said he never would have dreamed of prices sitting where they are today.
“There has been an unprecedented rally in dairy prices which is a good sign for the industry looking to the future.”
A global pandemic, geopolitical conflicts and now cost-of-living pressures have done little to curb the demand for Australian dairy products, with annual per capita consumption equating to 15kg of cheese and 93 litres of milk annually.
Australian milk production is currently sitting around 8500 million litres with a total farm gate value of $4.9 billion.
Around 36 per cent of total production is exported, with major export markets in China, Singapore, Indonesia, Japan and Malaysia.
Dairy remains the third largest rural industry in the country.
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