RISING production costs are continuing to put pressure on dairyfarmers, but global indications are showing promising signs for higher farmgate returns, according to the latest Situation and Outlook from Dairy Australia.
The February report, released this week, shows milk production is still lagging behind 2017-18 levels, tracking 4.8 per cent lower for the current season - to December.
DA’s forecast for 2018-19 milk production has been adjusted to reflect a 7pc to 9pc decrease, equating a total of between 8.45 and 8.65 billion litres for the full season.
Feed prices are considered the biggest impact.
In Central SA, grain prices in January had increased 46pc from the same month in 2018, while cereal hay prices jumped 181pc.
In the South East, grain was up 51pc and hay 164pc.
There is positive news as global dairy markets reveal healthy import demand with key markets continuing to grow including China (up 3pc), Japan (up 5pc) and Southeast Asia (up 6pc).
DA senior industry analyst John Droppert said the ongoing growth in markets such as China and Japan provided some comfort for the Australian dairy industry in an environment that was 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," he said.
"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."
Mr Droppert said it was still too early to quantify the impact of Woolworth's decision to increase private label fresh milk prices by 10 cents a litre, but it was a welcome move.
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, DA will be dedicated to providing the latest international and domestic market trends, statistics and facts to Australian farmers, in addition to onground support through the Regional Development Programs,” he said.
The Situation and Outlook is released three times a year.
View the full report here.
