NO SOONER had last year’s agricultural outlook conference reported a sobering slump in dairy demand and farmgate earnings, compounded by high fodder costs in Australia, the world ran out of milk sending markets shooting up as much as 33 per cent.
Australian dairy farmers’ average cash incomes for this financial year will be about 30pc above the average for the past decade according to the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES).
Although fodder costs continue to bite into farmgate earnings, the global dairy boom is expected to take next year’s national average price to a near-record 50 cents a litre, dipping slightly to about 46.5c/L (in 2014 terms) in the next five years as a tide of new milk production hits the market from Europe, the US, India South America, China and New Zealand.
World prices are still expected to average between 10pc and 40pc better than the past decade’s average prior to 2018 thanks to a lot of strengthening demand from Asia, the Middle East and North Africa.
Nearby Indonesia and the Philippines were set to import about 440,000 tonnes of milk powder this year and were fast developing a taste for cheese, while China’s milk powder imports jumped 40pc to 850,000t last year.
Australian milk prices would be about 7pc above the past decade’s average in 2015-16 and total milk production would climb back to 10 billion litres by 2018 according to ABARES agricultural commodities manager, Peter Collins.
With about 45pc of Australia’s milk production value exported as processed goods, next year’s dairy processing business export earnings were tipped to rise about 15pc.
Shareholder relations general manager with Australia’s biggest dairy company Murray Goulburn (MG), Robert Poole, told Outlook 14 global beverage and food giant Pepsico expected worldwide dairy consumption growth to double the performance of any other food category before 2020.
In fact, dairy consumption increases would be double the next two biggest food categories combined.
«So when a company like Pepsico says we want to invest in dairy because of this massive consumption story, you should listen,» Mr Poole said.
However, with the rest of the world wanting to cash in on the big market opportunities, prices are expected to ease as the European Union (EU) lifts production to a forecast 150m tonnes in 2014-15, mainly from France, Germany, Poland, Ireland and the Netherlands, despite current dry seasonal conditions.
EU quota restrictions on milk production expire in April next year.
According to ABARES US production is also tipped to lift 2pc to 93m tonnes this year and India 5pc to 140m tonnes .
Overseas production increases, including a likely 5pc increase in NZ output this year and in 2014-15 should not deter Australian producers according to MG’s Mr Poole, given the «exciting» long term demand trends shaping global markets.
«We have been going backwards in our production for various reasons, including drought and retirement from the industry, by 1.7pc a year while NZ has been growing 3pc/year,» he said.
«The number one thing we need to be part of this global dairy opportunity is production growth.
«There’s an incredible prize if we can get people investing in dairy again.»
Source: Queensland