Situation & Outlook Report
Dairy Australia is the Australian dairy industry’s go-to source for the latest international and domestic market trends, statistics and facts, providing expert analysis and unbiased insights.
The latest Situation and Outlook report describes how many factors support ongoing farmgate profitability this season, despite challenging conditions in part of the country this spring.
Last year proved to be one of the most profitable in recent times, as most dairy regions reported their highest average returns since 2013/14, according to the Dairy Farm Monitor Project. Gippsland and Tasmania were the only exceptions, where returns were the second best over this period, while in Queensland and NSW return on assets was the highest in over decade
This helped improve the health of many farm businesses and several factors, including a generally higher farmgate milk price, are supportive for the season ahead. Global dairy markets are contributing to this promising outlook. Global demand for dairy has improved as more countries re-emerge from lockdowns, at a time when supply is tight. Milk production has slowed in the main exporting regions this spring which has seen dairy commodity prices trend increase.
Consumer confidence has also improved in Australia, as people enjoy newfound freedoms. Shoppers are spending more money through foodservice venues, while retail demand for dairy remains strong. Retail sales of yellow spreads and milk have stabilised from the panic-buying highs of 2020 but remain above 2019 year levels.
While dairy market dynamics remain supportive, seasonal conditions have created several challenges this spring. Above average rain, storms and cold fronts have weighed on per-cow yields, caused flooding in some regions and disrupted harvest proceedings.
Additionally, labour shortages present ongoing challenges, while strong returns for other agricultural products and firm land and beef prices continue to drive culling and farm exits. These factors are negating otherwise profitable conditions and as such, growth in Australia’s national milk pool in 2021/22 is now looking increasingly unlikely.
Situation and Outlook December 2021PDF, 1.24 MB
Wet weather and cold fronts have impacted per-cow yields this spring. Other factors including labour shortages, firm beef and land values, and business diversification also continue to weigh on milk production. As such, any increase in Australia’s national milk pool this season is looking increasingly unlikely, despite otherwise profitable conditions.