Dairy farmers set for best result from past three seasons

Holstein cows
Expect the herd price of quality Holstein’s to rise as annual milk production is tipped to be in excess of nine billion litres a year with a strong overall farmgate price expected –photo The Holstein Friesian Association of Australia Inc.

Dairy production is heading for its best spring result in three seasons, as timely rainfall in key regions ramps up the nation’s milk production, according to a newly-released sector report.

National milk production is forecast to expand by 2.8 per cent in 2020-21, bringing it back above nine billion litres for the first time since the 2017-18 season.

The report says with rainfall expected to be above average across Australia’s main dairy belts from September through November 2020, the sector is on track for a strong result.

Known as the ‘spring flush’ it’s the time of the year when milk production typically surges, peaking in October.

The expected good result is in fact a follow on of the welcome turnaround in production conditions seen halfway through the 2019-20 Australian dairy season, which finished at the end of June 2020.

The tally for the national milk production for 2019-20 finished overall marginally down on the previous year at 8.775 million litres.

Dairy exports
For the full 12 months of the 2019-20 season our dairy export volumes were down just 7.1% year-on-year and this was seen as a good result considering the tight milk supply due to three years of continuous dry weather in many regions – photo The Holstein Friesian Association of Australia Inc.

At the start of the 2019-20 season things were a little glum as the first half of the period was dragged down by poor seasonal conditions with less rainfall than most would have liked.

But the timely summer rainfall in January 2020 changed all that, as key regions were soaked in optimism and the milk pool began to recover quickly.

Solid growth was led by Tasmania and eastern Victoria, while irrigated dairy farming operations in the southern Murray Darling Basin – a region that has contributed to the biggest milk production declines in recent years – were now receiving the rainfall and water market conditions they needed to improve production.

The snapshot of year-on-year for the month of June 2020, milk production was showing a steady increase, sitting at 4.1 per cent higher than the previous year, June 2019.

The dairy supply market is now in a position to export surplus as it continues to recover with milk supply growth.

More milk in the system will help alleviate some overhead cost pressures for dairy processors and will also allow dairy exporters to explore growth opportunities.

Dairy farmers are managing things well, the report said, with Australian dairy farm operators continuing to enjoy lower feed costs and elevated cull cow prices.

It is expected the farmgate milk price will remain broadly in line with the previous (Q2) predictions – at AU$6.30/kgMS for the 2020-21 season.

And if these forecasts are met, it will mean Dairy farm operators can expect a profitable season for 2020-21.

Dairy production
It is expected the farmgate milk price will remain around AU$6.30/kgMS for the 2020-21 season and if these forecasts are met, Dairy farm operators can expect a profitable season – photo The Holstein Friesian Association of Australia Inc.

Even with the effects of reduced traffic due to the impact of the COVID-19 pandemic, the retail sales of dairy products continue to grow above long-term trends, so this is a very positive sign. 

Once the pandemic restrictions and lockdowns have eased it is expected that out-of-home consumption of dairy, that is currently well below levels seen a year ago, will recover and add further volume.

Holding things back at the moment are ongoing lockdowns in Victoria, capacity restrictions in venues and cautious consumers limiting out-of-home sales in major cities.

Another area where a quick recovery will be sought is in overseas markets.

For the full 12 months of the 2019-20 season, Australia’s dairy export volumes finished 7.1 per cent down year-on-year.

However, there were reasons behind this fall including tight milk supply primarily due to three years of continuous dry weather in many regions.

This exasperated large falls in export shipments of skim milk powder, down 29 per cent, and butter was also down by 44 per cent for the year.

There were some bright export spots however, liquid milk and fresh cheese were able to improve on the previous season, and both grew by four per cent for the year.

Milking robot
With Dairy producers finally relieved of the low farmgate prices that threatened the viability of many operations just 18 months ago, the focus is now on new equipment installations photo The Holstein Friesian Association of Australia Inc.

The sector report also looked at milk production growth across the major export markets and found the expansion that began in Q2 2020 is forecast to continue expanding into 2021, and this growth has not been seen since 2018.

A likely production increase of 1.3 per cent year-on-year is expected across the main seven dairy export regions. The EU, US, New Zealand, Australia, Brazil, Argentina and Uruguay – in Q4 2020. 

This is expected to be followed by a one per cent increase in the first half of 2021 and 0.8 per cent growth in the second half of next year.