Dairy export volumes dip in line with production levels

Dairy Australia’s export report shows Australia has exported 2.9 per cent less tonnes year-on-year from July-October, which has meant the value of dairy exports for that period this year are down 9.6pc.

While butter, cheese (cheddar and other) and milk have all increased their export value for the financial year to October, between 10.7 and 33.9pc, milk powder and mixtures have dipped significantly.

While whole milk powder was by far the highest valued dairy export product in July-October 2017, at $285 million, it is down close to 50pc for the same period this year, at just under $147 million, with other cheese overtaking it by bringing in more than $200 million.

Skim milk powder has also dipped, although less significantly, with 7.3pc less volume being exported, returning 4.8pc less value year-on-year for the period.

Meanwhile, milk production nationally and in Victoria continues to trend lower for the financial year-to-date, with Victoria losing another 7.1pc in October to be sitting at 2143.7 million litres for July-October, down 4.4pc on the same period last year.

Rabobank senior dairy analyst Michael Harvey said the sizeable drop in production predicted for this season was the main influencer of the export figures.

“Milk production is down 4pc for the season to date nationally and that could get a lost worse post-Christmas as feed shortages hit and people need to turn off cows and cut back feed, therefore producing less milk,” Mr Harvey said.

“This means dairy companies need to prioritise certain products, for instance cheese is taking priority over most other major commodities, as it has a higher value.

“In the background is that global markets for any product are lower than they were last year, so there is less production and lower prices in the global market for those commodities.”

Mr Harvey said the liquid milk export stream was continuing to grow “because a lot of companies have been investing in trying to build market share in Asia”, with Dairy Australia reporting milk exports were up more than 16pc for the July-October period.

It has been predicted that Australia’s national milk production could drop as much as 7pc this season, and Mr Harvey said this would take it down to 20-year lows.

“The thinking for dairy farmers is there is a little bit of rain around, so they have set their business to get through the next few months, but if still hot and dry in February-March next year, they will reduce the herd size again,” he said.

“The milk price is unlikely to increase in the next six months, the feed price might see some relief but will still see a shortage in many parts of the country.

“There will be a lot of downgraded feed around which will help farmers buying in feed grain, but there is not a lot of reserved grain around and plenty of competition which will sustain high (grain) prices, so milk production falls could get even worse.”