Costs and season restrain dairy confidence

Some positives among the gloom in dairy industry


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DRY SEASON: The impact of drought conditions and high inputs such as feed and irrigation water has seen farmer confidence fall and exits rise.

DRY SEASON: The impact of drought conditions and high inputs such as feed and irrigation water has seen farmer confidence fall and exits rise.

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There are some nuggets among the latest data from Dairy Australia's Situation and Outlook report released Wednesday.

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The Australian dairy industry continues to be at the mercy of high feed costs, water prices and seasonal conditions.

National milk production is currently around 4.8 per cent below the 2017/18 season with areas hit by drought most affected and northern Victoria showing a fall of 22.6pc for December alone.

Figures announced in this week's Dairy Australia February Situation and Outlook report, show the impact  of rising feed costs and high cow culling percentages.

Dairy Australia senior industry analyst John Droppert said milk production levels were expected to deteriorate further as cost inputs bite.

Inputs were the key as hay and grain prices, and irrigation water, were expected to stay high for the balance of the year.

"It will take until late spring into summer, when the new crops  of hay and grain are harvested, for a change," he said.

"Until then there is nothing to disrupt prices, particularly for hay."

Mr Droppert said hay prices were expected to be more volatile due to large variations in hay quality.

Data from Dairy Australia also showed Victoria’s production for December was 8.8pc lower and 6.1pc down year-to-date.

In southern NSW (Riverina), milk production also slumped with production for December down by 15.6pc on a state figure of 11pc down.

Dairy Australia was now forecasting 2018/19 milk production to reach 8.45 to 8.65 billion litres, a fall 7 to 9pc relative to 2017/18.

Mr Droppert said production trends were similar to November’s figures with Northern Victoria all the way to Queensland hardest hit.

He said parts of Western Victoria and areas in Gippsland were “doing pretty well” but were still a bit behind the previous year.

Tasmania’s growth, up 5pc for December and 4.3pc year-to-date, were on the back of record increases last year.

The Situation and Outlook report said Queensland and New South Wales were expected to be hardest hit by the ongoing feed shortage and drought conditions.

Anecdotal evidence showed that the number of dairy farmers exiting the industry was higher than normal and culling rates were well up.

"Cow numbers are critical and these are expected to be down 5pc by the end of the season," Mr Droppert said.

The Situation and Outlook report showed that global dairy markets were positive with growth in import demand in China of 3pc, Japan 5pc and south-east Asia 6pc.

Mr Droppert said global supply was partly balanced on the back of small increases in New Zealand, matched to Europe which was slightly lower.

He said commodity prices were "well supported" and that provided comfort when converted back to farmgate pricing - particularly at the current exchange rate of US72 cents.

The report said there was also growth in higher-value areas including flavoured milk, premium dairy desserts as well as cheese and dairy spreads.

A smaller milk pool in Australia had already had an impact on prices to farmers - with recent price movements - and would continue to do so, he said.

Mr Droppert said anecdotal evidence showed confidence levels among dairy farmers were down, particularly in northern Victoria and north to Queensland.

In Gippsland levels were mixed depending on the season.

There had also been an increase in the number of exits from the industry and in the north of Victoria some farmers were seeking alternative uses.

Mr Droppert said in Gippsland there were transactions being made to other dairy farmers.

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