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High costs continue to drive production down

High costs continue to drive production down

Dairy Australia’s February Situation and Outlook report shows production costs continue to pressure dairy farmers.

Milk production continues to lag behind 2017/18 levels, tracking 4.8% lower for the current season to December and the impact of tough seasonal conditions is placing further pressure on many farmers.

Dairy Australia’s forecast for 2018/19 milk production has been adjusted to reflect a 7% to 9% decrease relative to 2017/18, equating a total of between 8.45 and 8.65 billion litres for the full season.

Whilst some farmers in the southern regions experienced a better than expected later spring and early summer this season, many farmers in New South Wales, Queensland, east Gippsland and northern Victoria have faced significant seasonal difficulties.

Currently on-farm, high prices for grain, hay and irrigation water persist with consequences being felt by the broader industry.

However, global dairy markets reveal healthy import demand with key markets continuing to grow including China (up 3%), Japan (up 5 %) and Southeast Asia (up 6%).

Dairy Australia’s Senior Industry Analyst, John Droppert, said the ongoing growth in markets like China and Japan provides some comfort for the Australian dairy industry in an environment that is proving challenging for many farmers.

“It’s easy to lose sight of the positive in an environment of rising costs of production, a challenging domestic market and tough seasonal conditions. Many farmers have had to make difficult decisions, and the numbers often aren’t pretty, but there are positives to be found in the broader market.

“As well as overseas, there are opportunities closer to home, and premium offerings are selling well in the Australian domestic market generating increased unit value,” he said.

“In addition, this week we’ve seen Woolworths announce plans to increase private label fresh milk prices by 10 cents per litre, passing that amount directly to farmers who supply the product. It’s too early to quantify the full implications of this decision, but for farmers it has been a welcome one.”

Healthy growth is evident in higher value subcategories including flavoured milk, premium dairy desserts and probiotic yoghurts. Both cheese and dairy spread sales have also experienced growth, the latter despite increased retail prices.

With farm input costs likely to remain high in the coming months, Mr Droppert highlights the value of information and resources such as the Situation and Outlook, to inform farm business decision-making.

“As farmers prepare for autumn and winter, Dairy Australia will be dedicated to providing the latest international and domestic market trends, statistics and facts to Australian farmers, in addition to on-ground support through the Regional Development Programs,” Mr Droppert said.

Released three times a year, the full February Situation and Outlook report is available at www.dairyaustralia.com.au/industry/dairy situation and outlook/situation and outlook february 2019.

Susan Hunter - Media Relations Manager | 0417 540 059 | susan.hunter@dairyaustralia.com.au
Cassie Whelan - PR Manager | 0422 677 476 | cassie.whelan@dairyaustralia.com.au

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