Dairy Situation and Outlook June 2016

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Dairy Australia analyst John Droppert answers some key questions surrounding the current outlook for the Australian dairy industry and factors driving the global market. Listen here:

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Overview

  • Many Australian dairy farmers have been hard hit by the impacts of a deep and persistent trough in international dairy markets after late cuts to farmgate prices by some processors in the southern, export-focused states.

  • Confidence amongst farmers measured by the National Dairy Farmer Survey (NDFS), conducted in February and March, showed a decline in the proportion of farmers feeling positive about the future of the industry from 74% to 67%. A recent supplementary survey suggests the number of farmers feeling positive about the industry has now dropped below 50%.

  • On farm, dry conditions, low allocations for irrigators and constrained pasture growth has coincided with a tight market for hay. Lower international grain prices have taken some time to flow through to the Australian market.

  • Following a challenging, dry season, many farmers in southeastern Australia are staring down the barrel of significant financial losses.

  • National milk production is expected to be down about 2% for the 2015/16 season to between 9.55 and 9.65 billion litres. The outlook for 2016/17 is heavily dependent on seasonal conditions, but a further 2-5% fall in production is anticipated.

  • On the international front, dairy demand has recovered in most importing regions over the past 12 months, with the overall volume of dairy trade up nearly 6%. However, supply continues to outpace demand. Despite early signs, a global market turnaround remains unlikely until 2017.

  • Although there has been some slowing, overall trends for supermarket sales of major dairy categories remain relatively stable.