Dairy Producers Remain Optimistic

AUSTRALIA - Peter Duggan, with Bord Bia looks at global dairy production and forecasts for the next year.

9 November 2009

2 minute read

Oceania

In the latest dairy producer survey conducted by Dairy Australia, respondents expressed greater confidence in their own dairy industry than they have in the wider industry, despite a slight dip in confidence since the previous survey in June 2009. Their view has been helped by an anticipated recovery in the global economy, better global demand for dairy products, lower feed input costs and stronger demand in Australia.

The IMF in their latest forecast, predict that the global economy will grow by 2.5 per cent next year. Russia, a significant importer of cheese and butter appears to be showing tentative signs of recovery despite the credit difficulties that they have experienced, while demand remains robust in China. Additionally, Japan looks set to increase imports of cheese next year as stock levels fall.

Lower Australian fertiliser and feed prices are expected to offset some of the decline in milk prices. Australian consumption has been supported by lower interest rates and a stimulus package, with per capita consumption remaining firm at 300 litres in milk equivalent terms throughout the 2008/09 season as more consumers opt for private label products.

Global supply of milk is expected to remain largely unchanged according to Dairy Australia. Dairy output is predicted to increase in New Zealand, Argentina and Brazil in 2010, although this growth will be offset by falling output levels in Australia, the EU and the US.

A strengthening Australian dollar poses possibly the greatest challenge to the Australian dairy industry. According to XE, the current AUD dollar is trading at 91 US cents, which would suggest that the AUD dollar could exceed Australian bank’s expectations next year, which are set at 85 to 93 US cents.