Dairy Farmers in most Australian Regions Well-Placed for Another Profitable Year – Cowsmo

Dairy Farmers in most Australian Regions Well-Placed for Another Profitable Year

Dairy farmers in most regions are well-placed for another profitable year, according to the March 2022 edition of Dairy Australia’s Situation and Outlook report.

Dairy Australia’s senior industry analyst Sofia Omstedt says although costs are going up across the board, Australia’s dairy industry remains profitable, with strong international demand and weak supply continuing to boost global commodity values.

Since the start of 2022, dairy commodity prices have increased.

But input costs also seem to only be heading in one direction – up.

Grain prices remain elevated, as compared with last year, while fertiliser, fuel and chemical costs have also increased.

The rise in dairy commodity prices has been driven in part by a shrinking global milk pool, with many key exporting dairy regions experiencing a drop in their production.

Meanwhile, buyers in key international markets have moved to build up stocks to mitigate supply chain disruptions, exacerbated by shipping congestion, container shortages and political tensions in Europe.

In Australia, the anticipated consumption rebound has lived up to expectations, with foodservice sector sales up by 24 per cent during the holiday period, and retail sales on par with pre-pandemic levels, showing an economy bounce back.

The Australian dairy industry is not immune to broad inflationary pressures, with cost pressures and margin impacts expected to be felt across the entire supply chain.

Despite this, supportive market fundamentals continue to provide cause for optimism, with growing demand and weaker supply underpinning elevated commodity values.

“With the national milk pool expected to shrink by between 1pc and 3pc this season, strong competition for milk is likely to continue well into next season,” Ms Omstedt said.

A contributing factor to the shrinking milk pool is that dairy cattle exports across Australia have increased by 10pc compared with the same time last year.

Increase in supply chain costs likely
Good times across many other sectors, including beef, is having an impact on dairy production, a Dairy Australia report says.

Dairy Australia’s senior industry analyst Sofia Omstedt said there were complex reasons to the shrinking milk pool.

“The national dairy herd was decreasing and really high beef prices have had a large part in that where people were choosing to cull because they were getting a very good price for their animals,” she said.

“Also, farm exits and retirements, people are choosing to leave the industry and retire and sell their their cows to sale yards and cashing in on those high beef prices. High beef prices and farm retirements would have more to do with a shrinking milk pool, combined with challenges around a very wet season.”

Ms Omstedt said costs had increased from the processing sector.

“We also know that costs have increased from the processing sector – for example, port clearance cost, ingredients, and packaging material, they have all increased in price,” she said. “We have also seen some flow through effect to consumers – milk, yoghurt, and cheese are all retailing at a higher average price compared to compared to last year. As the year continues, we can probably expect more of these higher costs for everything throughout the supply chain.”

For dairy, this could lead to consumers turning to cheaper products, rather than buying less overall.

 

 

Source: Farm Online

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