ABARES has predicted strong dairy growth and higher farm gate milk prices

ABARES dairy economist Andrew Cameron told a recent Regional Outlook, held at Shepparton, the world was at an interesting point in the global dairy cycle, with many competing influences at play. 

“At the moment, it’s really finely poised. We do expect global growth to remain relatively strong,” Mr Cameron said.

But he said while economic growth was expected to translate into higher dairy demand, much of that would come from New Zealand and America. 

“That’s going to place downward pressure on most of the dairy product prices, over the coming six to nine months, and we expect prices for butter, cheese and whole milk powders to fall, in 2018-19.”

The latest Global Dairy Trade saw another fall, by 0.3 per cent, to US $2885 a metric tonne. It last rose by 1.9pc in mid-May.

Mr Cameron said while that would typically be “unwelcome news” to Australian dairy producers and processors, there were some positive factors that would offset any price fall. 

“The most significant one is the floating Australian dollar... at the same time, the strength of the American dollar against other currencies, coupled with retaliatory tariffs, may mean US exports were markedly less competitive,” Mr Cameron said.

“That will provide Australian origin product with a bit of a competitive edge over US dairy, where we are expecting quite a lot of supply to come from.”

He said Australian processors were also actively seeking more milk, with pricing step-ups already announced by Saputo, Norco and Fonterra. 

Saputo increased its farm gate milk price to $5.95 cents/kilogram Milk Solids, while Fonterra raised its price to $5.98c/kg MS. Gippsland processor Burra has also announced a step-up.

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“We are forecasting a very small rise in farmgate milk pricing, in Australia, over this financial year,” he said.

But he said the downside risk to that forecast was the increasing reliance on supplementary feeding, coupled with the high cost of hay and grain. While the rainfall outlook was poor, crops were being cut for hay throughout South Australia and Victoria. 

“Hay prices tend to drop sharply when the new season’s crop comes to market, so perhaps there will be a little bit of relief, just around the corner,” he said.

Bonlac Supply Company chairman Tony Marwood said he had seen many farmers having to adjust their businesses fairly quickly. 

“We have seen cow cull numbers jump about thirty per cent, above normal,” Mr Marwood said.  

“There are on farm pressures of sourcing water, hay and grain – all those prices are through the roof, so farmers are having to look seriously at their businesses.”

Mr Marwood said autumn would be crucial, for the northern industry. 

“If we get a good autumn break and there is grass on the ground, farmers will be able to get through. 

“The fodder market is so hot, most farmers won’t secure fodder for next winter, so next autumn is critical for dairy.”

He said production may be down, but it was hard to judge by how much.

“We saw, during that extreme wet year, production north dropped by 15pc. On a rule of thumb, it could be 15pc but there are lots of factors,” he said. 

READ MORE: Dairy farmers making early cull call

Wyuna farmer Russell Pell said his production was up but challenging times lay ahead.

“We were lucky to get enough showers to keep the pastures really firing, but it dropped off at the end of August, into September,” Mr Pell said.

”Up until that stage, we were getting really good growth, but the challenge for us will be what the weather is going to be like, from here on in.”

He said the overcast, cool conditions of early October were “perfect cow weather”.

“If you have this sort of weather, they will be milking like steam,” he said. 

He said many pasture based farmers would be thinking about moving to planting maize and a feeding regime.