Spring flush good news for dairy farmers

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Australian dairy is heading for its best ‘spring flush’ in three seasons, as timely rainfall ramps up the nation’s milk production, according to a newly-released sector report.

Spring flush good news for dairy farmers
Australian dairy farm operators are in good shape as timely rainfall ramps up the nation’s milk production.

In its Q3 Global Dairy Quarterly, agribusiness banking specialist Rabobank forecasts national milk production 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.

With rainfall expected to be above average across Australia’s main dairy belts from September through November, the sector is on track for a strong ‘spring flush’ with production peaking in October.

 Rabobank senior dairy analyst Michael Harvey says this follows a turnaround in production conditions seen half way through the 2019-20 Australian dairy season, which finished at the end of June.

 "While national milk production for 2019/20 finished overall marginally down on the previous year at 8.775 million litres, it was a tale of two halves for the season," he says.

"Production was negatively impacted by poor seasonal conditions in the first half of the 2019-20 season, but timely rainfall across key regions since summer has seen the milk pool begin to recover from December last year."

South leading the way

This growth was led by Tasmania and eastern Victoria, while irrigated dairy farming operations in the southern Murray Darling Basin – the region which contributed to the biggest milk production declines in recent years – are now enjoying better water market conditions.

For the month of June 2020, Australian milk production was already 4.1 per cent higher than the previous June.

 "Australia’s exportable surplus will continue to recover with milk supply growth," Harvey says. "Not only will more milk in the system help alleviate some overhead cost pressures for dairy processors, it will also allow dairy exporters to explore growth opportunities."

Australian dairy farm operators also continue to enjoy lower feed costs and elevated cull cow prices.

Rabobank’s farmgate milk price forecast remains broadly in line with the previous (Q2) report – at AUD 6.30/kgMS for the 2020-21 season.

This will see the Australian dairy sector set for a profitable season, according to the report.

"Retail sales of dairy products continue to grow above long-term trends, according to the latest data," Harvey says. 

"That said, sales growth is moderating as ‘pantry loading’ (triggered by the coronavirus lockdowns) recedes.  And out-of-home consumption of dairy – while in recovery mode – remains well below levels seen a year ago, with ongoing lockdowns in Victoria, capacity restrictions in venues and cautious consumers limiting foot traffic in major cities."

In overseas markets, for the 2019/20 season, Australia’s dairy export volumes had finished 7.1 per cent down year-on-year.

 Large falls were recorded in export shipments of skim milk powder (down 29 per cent) and butter (down 44 per cent) for the year.

"Exports of liquid milk and fresh cheese were the leading lights, however – both growing four per cent for the year," Harvey says.

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