National milk production in the current season has steadied in recent months, with rainfall in many regions offsetting the impact of dry conditions and helping to check higher feed costs - according to Dairy Australia’s March Situation and Outlook.
After a difficult start to the 2019/20 season for many farmers, falling milk production has moderated to a decline of just 3.7% to date. Volumes in both December and January exceeded expectations, with December seeing the first year on year increase in milk production in 18 months.
Supply and demand of dairy products is yet to be materially impacted by the developing Coronavirus (Covid-19) outbreak, although most dairy commodities prices have trended lower in recent weeks. Face-to-face trade and business development activities have been widely disrupted, as has shipping and distribution, while the effect on underlying demand is uncertain.
Dairy Australia Industry Insights and Analysis Manager, John Droppert, said many farmers have been able to capitalise on favourable weather conditions and continued high farmgate prices, with the bulk of the milk production recovery centred on Gippsland and Tasmania.
“A recent recovery in national milk production, together with substantially more favourable weather conditions across many dairy regions have been positive developments at a time of strong local and global dairy market fundamentals.
“These have come amidst a tumultuous backdrop combining global disease with local drought and bushfires. Despite relatively stable supply and demand conditions, international trade faces the dual challenges of the ongoing African Swine Fever outbreak, and still-escalating Covid-19 crisis.”
Bushfires in parts of NSW, Victoria and South Australia affected 128 dairy farms – a number significantly - but the overall impact on milk production was minimal. The loss of milking cows was limited and most affected dairy farms were able to resume milking quickly due to effective co-operation between authorities, milk processors and industry bodies.
Globally, milk production remains subdued in key regions including the United States, Europe and New Zealand. Dairy demand continues to grow and global dairy import volumes grew 4.1% over the last twelve months.
Australian domestic demand for dairy remains robust with growth reported for all dairy categories in retail and higher average unit prices. Dairy Australia research suggests this growth is supported by consumer trust in the industry strengthening from 68% to 70%, and trust in dairy foods and products as healthy and wholesome growing from 81% to 84% over the past year.
Dairy Australia’s continues to forecast a drop in national milk production of between 3% and 5% to 8.3 to 8.5 billion litres for the full 2019/20 season. This incorporates the potential for further improvements in the event of a favourable autumn, but also recognises the patchy nature of the recovery and ongoing challenges in many areas.
The March Situation and Outlook report is now available to download.
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