Australian Dairies Bucking Volatility Trend

AUSTRALIA - Money is being made in Australian dairy farming despite a rise in domestic production and international market volatility.

6 July 2015

2 minute read

Oceania

Many farms have managed a year of consolidation and growth after being encouraged by farmgate prices of A$6 per kilo of milk solids, low feed costs and favourable weather.

This is according to Dairy Australia (DA), which found 75 per cent farmers were positive about the future in a farmer survey this year.

“Robust” domestic demand - about 60 per cent of production – has helped “cushion” the industry, along with a diverse range of export market, said DA analysts.

Notably, it has been southern export producers who have been reporting good margins, according to Rabobank’s second dairy quarterly report.

Major milk buyer Murray Goulburn has already announced a full year price of A$6 /kg MS, which Rabobank agribusiness analysts say will “certainly encourage ongoing investment” in the sector.

Production conditions have been favourable in most of northern and eastern Victoria and Tasmania, although Rabobank added that dry weather was continuing in western Victoria, Queensland and northern New South Wales.

Nevertheless, DA has slated national milk production to grow 2.5 per cent.

DA market analyst John Droppert emphasised the role of new markets and spreading risk across different buyers.

He said this allows exporters to take opportunities when they arise.

“Not all markets are the same – the world is a complex place,” said Mr Droppert. “We are seeing Russia, China, South East Asia and Japan all coming into the market at different times.

“This has really highlighted the value of not having all your eggs in one basket.”

With milk production high and tipped to rise further next year, Rabobank is forecasting Australia’s dairy exports to lift four per cent year on year.