Milk production tipped to fall: Westpac

The bank's economists are predicting milk production for the 2012-2013 season may be as much as 2% lower than last year's total, despite increasing herd sizes and a bumper spring, says agri-economist Nathan Penny.

"If you go back to January, milk volumes were up 6% on the previous year, which in turn was 10% better than 2010," says Penny.

"As recently as last month we were still expecting total production to be slightly up on last year, but since then the drought has pushed milk production levels off a cliff.

"Our best case scenario is now for this season's production to equal last year. However, it could be as much as 2% lower. It all depends on when the rains come."
Westpac agribusiness head David Jones warns that the full financial effects of the drought may still be several months away and farmers are urged to keep channels of communication open.

"Farmers have reacted very swiftly, shedding stock and otherwise re-shaping their operations, and, as a result, many are still in a fairly strong cash position. However, with the killing chains now at full capacity, uncertainty over feed supplies, and a likely shortage of replacement stock, a lot of their issues are still ahead of them," says Jones.

Jones says banks are ready and willing to support farmers, and farmers should include their bankers in the decision-making process.

"Our rural bankers are part of the community and in many cases are farmers themselves. They understand the particular challenges of managing animal welfare and financial issues, and have a considerable degree of operational independence," says Jones.

"We know that farmers need to act swiftly, and we are ready to respond swiftly should they need our help.
"The better informed we are, the better we can prepare and the more effectively we can provide that help."