Many Australian dairy farmers report they are in a "stable and happy position" - the best outcome in a decade, says Dairy Australia.
Improved weather conditions, a strong milk price, and overall stable input costs have provided grounds for profitability, Dairy Australia's May 2024 Situation and Outlook Report has shown.
DA's Analysis and Insights manager Eliza Redfern said data collected as part of the 2024 National Dairy Farmer Survey indicated that Australian dairy farmers' confidence remained buoyant.
"Despite increased climate and market volatility over the last four years, the proportion of farming businesses feeling positive about the industry's future over that time has remained relatively steady, at 68 per cent in 2024," Ms Redfern said.
"The data also shows that 80pc of Australian dairy farmers are feeling positive about their own businesses and back-to-back profitable seasons have led to a growing number reporting they are in a "stable and happy" position."
The report also indicated milk production for the 2023/24 season was now expected to be higher than previously forecast.
The report found larger-than-expected growth in February of 5pc year-on-year and further milk recovery in March, despite drier conditions in many regions, would propel national production 2-3 pc higher than expected.
For upcoming season, DA expected milk volumes to drop slightly, down by about 1pc, maintaining a national milk pool of about 8.3 billion litres.
The report indicated that the stabilisation of farm input costs may help mitigate some pressure during the 2024/25 season.
A tighter outlook for farm margins would impact farmer confidence and ultimately milk production, while existing challenges around labour and farm exits were likely to limit growth more broadly, the report found.
In the retail sector, dairy continued to perform well, despite the now entrenched cost-saving shopping behaviours of Australian households, Ms Redfern said.
The volume sold of cheese, dairy spreads and yoghurts continued to grow, each increasing between 0.8 to 2pc in the 12 months to March 24.
The report also confirmed the flow of overseas dairy products into Australia had reduced.
"Over the season-to-date from July to February 2024, import data shows 7.4pc less product has crossed the border compared to the same period last season," Ms Redfern said.
Significantly less overseas butter was purchased (-23.1pc) as local milkfat availability strengthened, but total volumes of imported whole milk powder, ice cream and cheese all increased (10.9pc, 2pc and 1.6pc respectively), the report found.
"Australian buyers have imported similar volumes from New Zealand this season (+0.2pc), but shipping challenges around the Red Sea and inflated costs have likely deterred purchasing from northern hemisphere exporters (-28.6pc from the United States and -10.8pc from Europe," the report found.
Ms Redfern said after some initial recovery leading into 2024, global dairy commodity markets were still searching for balance between supply and demand pressures.
Ever.Ag Insights Global Insights director Joanne Bills said she agreed milk production was likely to "retreat" next season.
"Based on market fundamentals farmgate milk prices should be lower in 2024/25, and this will impact production decisions," Ms Bills said.
"The dynamics around the beef market and the value of cull cows will also be important."
She said the high levels of farmer confidence were pleasing, but historically had been linked to milk price rather than profit marings.
"A lower announced farmgate price may knock confidence, even though for many, input costs will be lower and profitability would still be okay."
She said processor margins had clearly been under pressure this season and were unlikely to let up in 2024/25, even if farmgate prices dropped.
"There will undoubtedly be pressure on wholesale prices given the political pressure on retailers and the trends the DA data highlight toward trading down to private label products, and we see little joy in export markets," she said.
There were few prospects for supply growth, from other parts of the world, and that was the only support for dairy commodity prices.
"The demand landscape is indeed bleak, we don't see many signs of a Chinese import recovery, and the economic conditions will also impact South East Asian demand, which is also relatively weak," Ms Bills said.
"Ingredient demand is being affected by other factors such as high cocoa prices having an impact on confectionery maker demand.
"Despite low stocks of skim milk power (SMP), prices are still heading sideways as NZ shifts its product mix to SMP/butter and away from whole milk powder (WMP)."
