Agriculture
21 May, 2023
Milk prices have firm landing zone - industry report
DAIRY producers can look forward to another favourable season with the sector set for its fourth consecutive profitable year, according to the annual Australian Dairy Seasonal Outlook. Rabobank says in its outlook that while the upcoming season’s...
DAIRY producers can look forward to another favourable season with the sector set for its fourth consecutive profitable year, according to the annual Australian Dairy Seasonal Outlook.
Rabobank says in its outlook that while the upcoming season’s milk price will likely be lower than the “lofty highs” currently being offered across parts of the southern export region – reflecting the current downturn in the global commodity price cycle – there is a “firm landing zone” expected for new season Australian milk prices.
It says this is due to stronger domestic dairy market returns, a weak Australian dollar and “aggressive recruitment and retention strategies” by dairy processors in a competitive market for milk supply.
And these are providing a buffering effect to the full extent of global pressures, said report author, Rabobank senior dairy analyst Michael Harvey.
With the June 1 deadline approaching for minimum milk price offers from Australian dairy companies, the bank is forecasting minimum offers for new season milk in southern Australia to be between AUD 8.50/kgMS and AUD 9.00/kgMS.
“At worst, this represents a 10 per cent decrease from 2022-2023 prices and a farmgate milk price that is well above the medium-term average for southern Australia since the introduction of the industry’s Dairy Code of Conduct in January 2020,” Mr Harvey said.
“Another season of historically-elevated milk prices will support farmgate margins.”
The report says there is “welcome relief” for dairy farmers from a recent record-high cost base, with lower prices for purchased feed and fertiliser flowing through balance sheets.
“Even if some dairy farmers see an easing in minimum price offers, this should come with cost relief,” Mr Harvey said.
However, the Rabobank Outlook warns, there will still be other cost headwinds on farm in 2023-2024 including higher interest rates with “labour is a major headache”.