Dairy Situation and Outlook June 2016
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:
- 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.