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The dairy industry outlook is finely balanced at present according to the national Situation & Outlook report released today.
The report found that dairy demand remains very positive with both local and international markets showing great strength and world prices reaching record levels.
But at farm level the outlook is much less certain. Farmers have faced tough decisions in recent times with rising costs, particularly for feed. The continued impact of drought and the associated climate debate has also increased uncertainty at farm level and raises questions about how well placed the industry is to take advantage of the emerging market opportunities.
The report, which includes a national survey of 1000 dairy farmers, found the severe drought is limiting the industry’s ability to capitalise on strong markets and has dented farmer confidence. Despite the conditions, many dairy farmers have demonstrated their ongoing confidence in the industry by planning for the future and investing in on-farm capital.
The survey, which is put together by the national services company Dairy Australia, found that farmers could expect to see the benefits of strong global and domestic demand for dairy products flow through to milk prices next season with increases of 10 to 15 per cent predicted for major production regions.
"Even with higher prices, the weather in the next few months is crucial to farmers. Feed costs, the limited availability of fodder and questions over water stocks mean farmers still face some tough decisions," Dairy Australia managing director Mike Ginnivan said.
“This is why Dairy Australia and the main industry groups have initiated a number of collaborative responses aimed at supporting farmers to make good business decisions and to position the industry for recovery.”
The report found that farmer confidence appeared to be linked with the later than expected appearance of autumn rains with farmers in some areas experiencing large drops in confidence between February and April this year. Nationally, 54 per cent of farmers were positive in February compared with 61 per cent at the same time last year.
The high prices for dairy products on the global market are the result of less supply from the traditional exporters of dairy combined with a steady demand which in turn is being driven by a strong world economy and improved perceptions of dairy, particularly in developing countries.
Dairy Australia’s general manager of Trade and Strategy Chris Phillips said the global market was likely to remain strong.
“The world market seems to have moved to a new dynamic over the past year. Pleasingly, it is strong commercial demand rather than just policy change that is driving the market, so the foundation for the further price gains seems solid.
“And if trade talks like the World Trade Organisation Doha Round do reach agreement this year that will further underpin the market confidence,” he said.
The report’s co-author, Dairy Australia’s manager of market and policy analysis, Joanne Bills said the survey revealed farmers had learnt hard lessons from the 2002/03 drought, with eight-in-10 creating plans to see them through the dry conditions. The plans, which mainly sought to minimise financial losses or maintain production base, have paid off with milk production for the season to March down by just 4 per cent.
“That’s a remarkable effort in the face of such widespread drought. It should be noted that this production performance has come at a significant cost to dairy farmers through increased grain and fodder costs through most of the season,” Ms Bills said.
The report was facilitated by Dairy Australia to provide a wide audience with a snapshot of the industry and its short to medium term outlook. As well as a national survey of dairy farmers, it included the views of global dairy market analysts, retail analysts, dairy company management, farm consultants and farm leaders.
For more information, contact Sid Pickering on (03) 9694 3894 or 0408 175 611 or
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