AUSTRALIA - International dairy commodity prices have staged a significant recovery in recent months, as global supply and demand slowly return to a more balanced outlook, according to Dairy Australia’s latest Situation and Outlook report.
However, this season’s low farmgate prices continue to squeeze farmer margins in southeast Australia, impacting national milk production.
The October Situation and Outlook has revealed decreased milk production from Australia, New Zealand and Europe is helping ease the downward pressure on global commodity pricing caused by the oversupply issue of recent years.
Dairy Australia senior analyst John Droppert said Australia’s milk production was forecast to drop 5 per cent over the full season for 2016/17, as a response to low milk prices, tight margins and the ongoing impacts of flooding and excessive rain in some regions.
“The first two months of this season has seen significant year-on-year declines in national milk intakes averaging 9 per cent," he said, "But the impact on the overall national milk volume is expected to moderate as the season progresses and the benefits of good rainfall (excluding flood and excessive rain damage) and lower costs for feed, fertiliser and water accrue for farmers across the nation.”
Mr Droppert said commodity markets were in a much better place than this time in 2015, but downside risks remain.
“The perennial challenge for both processors and farmers is to secure adequate milk flows to capitalise on market opportunities, while protecting against damaging price shocks. This will remain top of mind as the industry finds its feet in 2016/17,” he said.
Internationally, demand is presenting a mixed picture, with China returning to growth, while other markets are more sluggish. The value of global exports fell by 19 per cent, with falls across all major markets, largely reflecting the lower global prices for key dairy commodities.
TheCattleSite News Desk