Australian milk production down 7.8% in November on back of poor season

The latest figures from Dairy Australia reveal November production was down 7.8 per cent compared with the previous season, while year-to-date production was down 4.8pc.

But the overall figures masked huge drops in the areas hardest hit by drought conditions.

Northern Victorian production fell 20.3pc in November and 13.1pc year-to-date, while Queensland production was down 13.4pc (10pc year-to-date) and NSW production was down 12pc (9.5pc year-to-date).

Overall Victorian production was down 9.6pc (5.5pc year-to-date) with Gippsland down 4.2pc (2.3pc year-to-date) and Western Victoria down 5.5pc (2.3pc year-to-date).

Western Australian production fell marginally (down 1.8pc for November and 1.5pc year-to-date).

Only South Australia (up 2.2pc for November and 3.5pc year-to-date) and Tasmania (up 1.8pc for November and 4.1pc year-to-date) bucked the trend.

The figures back ABARES's latest forecast for a 4.1pc production drop overall for season 2018-19 to 8.9 billion litres. 

This would be the lowest production level in Australia since 1995-96. 

The National Australia Bank's monthly Dairy in Focus report released last week highlighted the impact of the tough seasonal conditions and cost pressures.

"Cost pressures have been intense, particularly for feed and water amid a very tough season across much of eastern Australia," NAB Agribusiness economist Phin Ziebell said. 

It was likely that feed prices would remain high for a few months yet, with the grain shortage set to continue, unless there was a solid autumn break. 

“The NAB feed grain price index rose an enormous 74pc during 2018, and we anticipate that prices will remain elevated over coming months," Mr Ziebell said. 

"Water entitlement prices are also trending higher, with temporary water licences ranging from $300 to $500 in recent times.”

Prices cracked the $500 a megalitre mark last week on the Victorian Waterpool exchange, hitting $502.50/MG.

Mr Ziebell said seasonal conditions had been mixed to poor for Australia’s major dairying regions. 

"2019 is yet to bring any relief, with much of the country sweltering through a severe heatwave and a drier than average three-month outlook," he said. 

The tough season has tempered the increase in export dairy prices.

NAB's dairy export price index rose 10.2pc from December 2018 to January 2019 – the biggest monthly gain since 2016.

The price index has lifted in the last four Global Dairy Trade auctions. 

Mr Ziebell said the increase in the GDT index was largely attributable to slowing supply and a sharp rundown of the European Union’s skim milk powder stockpile.

“That said, EU monthly production remains near the top of its five-year range, although it appears there is little appetite for further production growth,” he said.

"The United States and New Zealand are also close to the top of their five-year production ranges.

“While these price increases are certainly welcome, our forecasts aren’t showing any major gains for global prices in USD terms over the coming months.”

NAB’s outlook for the Australian dollar is stable, with the dollar set to sit in the US70–75 cents range.

Article courtesy of Australian Dairyfarmer