GLOBAL dairy prices are finally starting to show some upward movement, and that has flowed quickly through to farmgate prices in south eastern Australia.
However, the shift can only be considered recovery, with returns still a long way from what would be considered sustainable in many big dairy production regions, analysts and industry leaders say.
Global Dairy Trade’s late-September auction result showed a 1.75 per cent lift in the price index and the National Australia Bank’s weighted dairy export price indicator rose 6.8pc in August and 21.5pc in September.
Murray Goulburn has just announced a step-up of 15 cents to $4.46 per kilogram milk solids and Warrnambool Cheese and Butter’s price has been increased to $4.80/kg ms.
Dairy, along with the strength of red meat, was the big driver of NAB’s rural commodities index lift of 1.5pc in August and the fact it is on track for another moderate increase in September.
The index, which includes 28 commodities, is weighted annually according to the gross value of production of each industry.
The NAB dairy indicator is now at $3908.70/tonne, where five months ago it was below $3000/t.
NAB agribusiness economist Phin Ziebell said a big reason for the dairy rebound was the fact New Zealand had not produced as much as anticipated and supply from the European Union was also flattening out.
Mr Ziebell said good rain across much of eastern Australia provided further optimism, with the big dairy production hub of Victoria in far better shape now than it was coming into summer last year.
“Having said that, prices certainly are not incredible for dairy,” he said.
“We’re not talking boom - it is still very much recovery.”
China, a key export market for Australian dairy, was one area for concern, with milk powder purchasers far less active, Mr Ziebell said.
“The historic peaks (for China dairy purchases) in 2013 and early 2014 don’t look like they will be repeated,” he said.
“China is increasing domestic production - we see that with the amount of Australian hay going to China.”
Murray Goulburn’s interim chief executive officer David Mallinson said market conditions remained volatile, however “we have been able to capture enough of the current uplift to pass on both a step-up and modest increase in full year forecast to suppliers.”
“Whilst international dairy markets have improved recently, they remain below historical average levels,” he said.
“Recent signs of recovery have come as global milk supply slows year-on-year. However, commodity prices and the strength of the Australian dollar remain a source of risk to current full year forecast.”