The Australian dairy industry exported more milk, but it was worth less, as global dairy prices took a significant slide during 2014.
Dairy Australia figures for the six months to November 2014 indicate the volume of dairy exports increased marginally by 1.1 per cent, but the value of exports was down almost 11 per cent.
Dairy Australia analyst John Droppert said the figures reflect volatility in international markets, but also showed Australian processors had been able to change the mix of products they made to get the best price.
«At times like this, when the market is moving differently for different products and you are trying to maximise the value out of your milk, being able to be really choosy about where you put it is actually a good thing.»
Mr Droppert said the Australian industry was performing relatively well compared to competitors internationally.
«What we’re seeing in some other parts of the world, and particularly our major competitors, is farmgate prices are dropping really sharply and dropping month to month and that obviously undermines confidence and it obviously hits some farming businesses pretty hard,» Mr Droppert said.
«There’s certainly no doubt that those same international forces are going to come and make themselves known to Australian farmgate prices as well, but certainly we’ve got a bit of warning of what’s coming.
«We’ve seen processors able to hold their farmgate price and that’s helped to give farmers a bit of warning and protect themselves in time for those commodity price changes to come through. Even if we see a lower farmgate price in the new season, we’ve had time to adjust and make the necessary changes.»
Mr Droppert said a weaker Australian dollar also assisted the local industry.
«It wasn’t too long ago in 2012-13 we were looking at US$1.05 (to one Australian dollar). Now we are down to 80 cents.
«That certainly helps, converting those returns back to Australian dollar terms, and it’s also mitigated some of the falls we’ve seen in these export figures.»
British experience
Across the world, dairy farmers are feeling the pinch with the global market indicator showing trading prices for dairy products have halved in just 12 months.
The Royal Association of British Dairy farmers says nine farmers in the United Kingdom are walking off the land every week as dairy prices plummet below the cost of production.
British farmers have been badly hit by the slump in world dairy prices, one dairy co-operative, First Milk, has delayed payments to farmers and there are concerns it may be at risk of going under.
The association’s chief executive Nick Everington says in the British spring farmers were receiving 35 pence a litre for their milk, but some are now getting just 20 pence, which is less than it costs to produce milk.
He says farmers who were expanding production ahead of European milk quotas being expired later this year have been caught out.
«Business plans going forward were based on the low 30 pence per litre, but of course, within six months that price has crashed,» Mr Everington said.
With strong domestic demand for fresh milk, the United Kingdom has historically not been as exposed to the movements of global markets as other milk producing nations.
Charlie Taverner, a business reporter with the U.K’s Farmers Weekly, said in an effort to reverse a dairy deficit of more than a billion pounds, the U.K industry had to price its products competitively to fight off imports.
«Because of that it has to integrate itself more in world markets and that means the world crash in dairy products that we’ve seen has affected the U.K,» Mr Taverner said.
Increasing dairy production in Europe, ahead of the abolition of quotas in a few months time, has also put downward pressure on prices.
«What that means is the brakes in production that each country has had are being taken off and a lot of countries have been ramping up, particularly the likes of the Irish, the Germans, the Netherlands, have been upping production and that’s put extra pressure on supply,» Mr Taverner said.
Declining dairy industry
Nick Everington, of the Royal Association of British Dairy Farmers, says the industry is worried about the rate of dairy farmers leaving the land.
«The number of dairy farmers have halved in the last 12 years and we need to have dairy farmers to produce milk to feed a growing global population,» Mr Everington said.
«The long term prospect actually for dairy is very positive, but we just need to get through this volatile short term problem and hopefully things will improve.»
Charlie Taverner said while some farmers were intending to ride out the current profit plunge, confident prices would improve in the future, others were finding it tougher.
«Dairy farmer numbers in the U.K have fallen dramatically since the industry was deregulated back in 1994 and currently there are just under 10,000 dairy farmers in England and Wales.
«There are some quite dire predictions for this year. Some people are saying we might lose another thousand, what could happen is by 2025, rather than the 10,000 dairy farmers there are here today, there could be 5,000,» Mr Taverner said.
«There’s a huge impact then on rural communities and other industries linked to farming, they are going to take a real hit too if those people drop out of dairy.»
Source: ABC
