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Southbank, Victoria, Australia, 2014/02/12 - Australia’s farm gate milk prices are up around 25 per cent on last season and the outlook for global demand for dairy, particularly in China, remains robust - DairyAustralia.com.au.
Despite the overall positive trends, increased cash flow for dairy farmers is being directed to creditor payment and debt retirement, according to Dairy Australia’s Situation and Outlook Update report released today.
Global dairy demand remains on a steady footing despite pricing at near record levels and production shortfalls in China and Russia have boosted import demand in those markets. Southeast Asia is showing steady growth despite localised challenges, and exports to South Korea should benefit from the yet to be ratified Korea-Australia Free Trade Agreement.
Australia’s milk production trails 2012/13 in year-to-date data and is expected to finish the year at levels the same or slightly lower than those recorded in 2012/13, due largely to ongoing issues from the challenging second half of the year.
Dairy Australia is forecasting milk production of 9.0-9.2 billion litres for the 2013/14 season, a contraction of between 0-2 per cent.
“Poor weather has been a constraining factor, particularly in northern regions, as have lower in-calf rates and pasture damage,” said Norman Repacholi, Commercial and Research Analysis Manager at Dairy Australia.
“But as the season progresses, confidence will likely firm with the farm gate price and this will provide the latitude to capture some production opportunities,” said Mr Repacholi.
“Processors will attempt to adjust product mix to maximise returns where contractual arrangements permit, still, lower than expected production could mean delays in fulfilling orders.
“At the same time, producers focussed on Australia’s domestic market have not seen the same, if any jump in milk price as those experienced by dairy producers in export focussed regions. They are also still facing cost pressures as a result of unfavourable weather or tight regional hay and grain supplies,” he added.
Mr Repacholi said Australian dairy heifer exports are still in high demand with live cattle exports up 12 per cent to around 85,000 head in the year to November 2013 with China the major buyer (79 per cent) followed by Pakistan (10 per cent) and Russia (4 per cent).
On global currency movements, the weaker Australian dollar is likely to place upward price pressure on imports such as fertiliser, fuel and grain prices.
“Australia’s supermarket milk and dairy spreads, volumes and values are remaining stable, cheese volumes are up, but discounting of chilled (block) cheeses has shown a slight decline in the total category value, ’ said Mr Repacholi.
“Despite last season’s challenges, Australian dairy has scored international headlines with the competition to acquire Warrnambool Cheese and Butter (WCB) and a rush of other major transactions.
“The intense business interest in the potential of Australian dairy in the region reinforces how well regarded our sector is for its quality produce,” said Mr Repacholi.
The full report of the February Update is available at dairyaustralia.com.au/.
Dairy Australia is the national services body for the Australian dairy industry. The company acts as the collective investment arm of the industry, investing in essential research, development, extension and industry services.