Australian milk production tipped to fall to lowest level in more than 20 years

Australian milk production is forecast to hit its lowest level in more than 20 years even as global prices surge. By Julie-anne Sprague.
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Rabobank has released a report showing global dairy prices are expected to increase after already rocketing 45 per cent since July.
But surging prices will not offset deep cuts in Australian milk production last year after the nation’s biggest processor, Murray Goulburn, retrospectively slashed milk prices, leaving some farmers to cull herds or quit their farms.
Rabobank has forecast Australian milk supply to fall 7 per cent this year, which would push production down to 8.9 billion litres, the lowest level in more than 20 years.
Rabobank senior dairy analyst Michael Harvey said last year’s milk price cut, which occurred late in the season, exacerbated production declines created by poor seasonal conditions.
While the price rally would help stabilise production, it would not offset last year’s falls, he said.
«We do expect production to stabilise in the coming months given farmers now have better seasonal conditions, more feed and irrigation water,» Mr Harvey said.
«Hence we think production will start to increase year-on-year in the next six months. But it will not make up lost supply given the structural fall in the herd size.»
Murray Goulburn appointed former Carlton and United Breweries boss Ari Mervis as its chief executive in December to help turn around its fortunes and repair its tattered reputation among farmers.
Mr Mervis starts on February 13. The processor is the subject of a dedicated Australian Competition and Consumer Commission probe over the price cuts and a possible class action from angry unitholders.
Mr Harvey said there had been some positive movement in farmgate milk prices in recent months and the continuing global rally was lifting expectations among farmers.
«With the prices of all dairy prices set to improve over coming months, it has considerably lifted expectations amongst Australian farmers for stronger opening prices in the 2017-18 season,» Mr Harvey said.
But many full-year price forecasts were still below production costs, he said.
Mr Harvey said a disparity in global dairy prices – whole milk powder prices are surging compared to weaker skim milk powder prices – had so far limited the ability for Australian producers to capture the rally.
«Whole milk powder makes up less than 10 per cent of the Australian product mix with our focus on cheese-and-whey products due to contractual arrangements, so this has muted our ability to capture much of the increase in global prices this season,» Mr Harvey said.
Rabobank’s latest Dairy Quarterly report shows milk supply from dairy export regions fell sharply by 2.6 million tonnes in the second half of 2016 at the same time as domestic demand in the US and Europe rose, which cut the amount of product available for export.
«As a result, global dairy prices have rocketed upwards,» the report said.
«The current price rally has further upside to come as milk supply growth across the export regions will take time despite improving milk prices.»
The price rally has been generated by a drop in supply, rather than rising demand, the report said.
Source: FinancialReview
Link: http://www.afr.com/markets/commodities/agriculture/australian-milk-production-tipped-to-fall-to-lowest-level-in-more-than-20-years-20170110-gtovj7

Mirá También

Así lo expresó Domingo Possetto, secretario de la seccional Rafaela, quien además, afirmó que a los productores «habitualmente los ignoran los gobiernos». Además, reconoció la labor de los empresarios de las firmas locales y aseguró que están «esperanzados» con la negociación entre SanCor y Adecoagro.

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