News

Dairy farmer confidence rises with milk production

By Jamie Salter

One of the best autumn breaks of recent times has supported a significant recovery in national milk production and boosted dairy farmer confidence in many regions.

According to Dairy Australia’s June 2020 Situation and Outlook report this follows uncertainty in dairy markets due to COVID-19.

After a challenging start to the season, national milk production has increased year-on-year for the past five months to April.

This led Dairy Australia to moderate its milk production outlook for 2019 to 2020 upwards to a drop of just one to three per cent on last year, to between 8.5 and 8.7 billion litres in total.

While global demand and commodity pricing were affected due to reduced activity in food service channels, Australian retail demand increased.

Long-life milk sales surged 76 per cent at the outset of the virus and fresh milk, yellow spreads, cheese and yoghurt sales volumes remain elevated.

Dairy Australia’s senior industry analyst Sofia Omstedt said improved conditions resulted in a significant recovery in Australia’s milk pool.

“With more manageable input costs, generally favourable seasonal conditions and relatively strong farm gate milk prices this season, overall industry confidence has improved,” she said.

Australia’s milk production recovery is mainly driven by strong growth in Victoria, with irrigation prices dropping in northern Victoria for the fourth consecutive month.

Prices have halved since the start of the year and improved water forecasts will further ease key input costs for feed and water.

Held in February, the 2020 National Dairy Farmer Survey found 44 per cent of farmers were positive about the industry’s future — up 10 per cent from last year but still lower than 2018 and 2017.

Australian Dairy Farmers president Terry Richardson said the survey results were a welcome boost from last year.

“The industry is still facing some considerable challenges, but this is a positive outlook for the future, with dairy products remaining a staple household item,” Mr Richardson said.

“It appears farmers are recovering from recent production losses and encouragingly, some farmers are actively entering an expansion phase, even as many continue to battle drought, high feed and water costs, and other elements.”

A supplementary survey in early May showed about 20 per cent of farm businesses had been impacted by COVID-19, such as sourcing farm materials.

While new minimum farm gate milk prices announced on June 1 as part of the Dairy Code of Conduct exceeded earlier expectations, they will represent a decrease compared to the current season pricing for most farmers.

This highlights the importance of lower costs to support farm profitability across all regions.

To read the report, go to: https://www.dairyaustralia.com.au/industry/dairy-situation-and-outlook/situation-and-outlook-june-2020