$8 milk price this season 'out of reach'
An $8/kgMS farmgate milk price for this season may be out of reach, according to ASB economist Nathaniel Keall.
Dairy Australia says in its June 2015 Situation and Outlook Report that the year was one of consolidation and growth for many farmers.
Reflecting a solid season, Dairy Australia forecasts national milk production to be 9.45 to 9.50 billion L for 2014-15 – about 2.5% more than the previous season, which had only grown 0.4% from the previous year.
While international prices remain depressed due to abundant supply and lacklustre demand, Australian dairy farmer confidence remains high.
Results from Dairy Australia’s 2015 National Dairy Farmer Survey (NDFS) indicate 74% of dairy farmers are feeling positive about the industry’s future, in line with 2014 sentiment. The surveyof 1000 dairy farmers also revealed 79% of farmers anticipate a profit for 2014-15.
Dairy Australia managing director Ian Halliday says farmer confidence has weathered the global market storm.
“Farmers in many dairying regions have taken advantage of the stable production margins and favourable weather over the past year.
“Milk processors are publicly forecasting similar farmgate prices for the 2015-16 season, and continued domestic and global demand have also been encouraging.
“More stable returns generated by the Australian domestic market, which consumes 60% of milk production, have helped cushion the industry through an internationally volatile 2014-15.
“And having a diverse range of markets and products has paid dividends for Australian exporters this season. It spreads our exposure to the volatility the global market can present, hence we haven’t felt the pinch of China’s decreased bulk powder imports.”
In Australia, dairy demand remained robust for 2014-15, Dairy Australia industry analyst John Droppert says.
“Recent figures show strong growth in spending by the food service and supermarket industries, though the pace of growth has slowed in recent months.
“Australian supermarket sales of major dairy categories continue to tell an essentially positive story. Dairy spreads remain the top performer, outpacing all other major dairy categories for volume and value growth. Milk sales are increasing slowly and steadily and despite shrinking sales volumes, higher average/kilo prices for cheese and yoghurt/dairy snacks are growing in value.”
While nationally farmers are confident, the NDFS pointed to marked regional differences in sentiment. Tasmanian farmers are most positive (84%), then those in the Murray region (northern Victoria and the Riverina) and central and southern NSW at 81%. Confidence in the subtropical region of Queensland and northern NSW has improved a lot from 33% in 2014 to 55% now, but is well below the national average.
Droppert says survey results suggested the improvement could be based on an improved farmgate pricing and procurement environment, and greater external investment interest in the region.
More broadly, 64% of those surveyed across Australia identified benefits to the industry as a whole from the recently concluded free trade agreements with Korea, Japan and China.
