"A second season with few palatable options"

Dairy Australia Situation & Outlook report: "A second season with few palatable options"

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Dairy Australia Situation & Outlook report describes "a second season with few palatable options" and forecasts another plunge in milk production.

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Source: Dairy Australia.

Source: Dairy Australia.

United Dairyfarmers of Victoria president Paul Mumford wasn't surprised by the sobering numbers in Dairy Australia's Situation & Outlook report released today.

"Farmers are under stress, they're tired and they're really questioning the viability of dairy," he said.

Despite record high farmgate prices, milk production is continuing to drop, with DA today forecasting a decline of 3 to 5 per cent on last year's 5.7pc fall.

It takes the expected national milk volume down to between 8.3 and 8.5 billion litres for 2019/20, the lowest in a quarter of a century.

That's despite record high farmgate milk prices offered by processors desperate to secure a share of the shrinking milk pool.

The explanation is simple, according to the Situation & Outlook report.

Farmers in regions enjoying a good start to the season are clawing back profits lost in the last few tough years.

But, for, those in drought or faced with dizzying water prices making even home-grown fodder expensive, this, as the report describes it, is "a second season with few palatable options".

There's little choice other than to sell more cows.

The national herd has shrunk 7pc in the last year to a yet-to-be-confimed figure of 1.44 million dairy cows.

According to DA, 84,639 cull cows were sold in the 12 months to August and a staggering 102,042 dairy cows were exported.

Those export levels were up 113pc and represent heifers that would might otherwise have rebuilt the milking herd.

Dairy Australia analyst John Droppert said the differing fortunes of farmers were laid bare in production figures.

"We've only got early numbers for September so we haven't actually released them yet but it's looking like Gippsland had a small increase in September," he said.

"Tasmania was up slightly, about 0.5-1pc, in September as well but everywhere else is still down.

"We're talking 10pc-plus for for Queensland, Northern Victoria is more like 9pc whereas in western Victoria, there's been a 5-6pc decrease.

"These are provisional figures that might change but the scale of the difference between regions is apparent."

UDV president Paul Mumford wanted to highlight the plight of northern Victorian dairy farmers.

"It's getting a little bit beyond a joke," he said.

"The whole industry including myself, have to give that region some hope and an opportunity to grow their industry in some form.

"Have we got solutions?

"I'm happy with what is starting to unfold but I'm not quite there yet.

"That's frustrating because I know farmers are going broke as I speak and that doesn't sit too well.

Mr Mumford was not surprised regions like south-west Victoria and Gippsland had not yet bounced back.

"The true state of the industry is being masked by a high low price right at the moment," he said.

"A lot of things need to happen before we're actually going to see a calming effect.

"We have to address droughts and issues like the mandatory code - we need stability back in the industry before it can prosper again."

Asked about the flow-on impact on the processing sector, Rabobank dairy analyst Michael Harvey said dairy companies had options.

"They could buy third-party milk, transport milk between regions, use assets differently, extend factoryshut down periods or even diversify outside dairy," he said.

"The ability to deploy these strategies varies amongst the companies.

"But, broadly speaking, if there is excess capacity and a failure to reboot milk supply in the coming years, then there will be pressure for further capacity adjustments.

"It's just hard to put a timeframe on it."

The story "A second season with few palatable options" first appeared on Stock & Land.

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