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Insights January 2020

6 January 2020 |Dairy
Dairy cow image

Insights January 2020

6 January 2020 |Dairy
The January update provides an analysis of production and pricing trends for Australian dairy producers. It provides producers with a timely overview of current trends and an outlook for the coming months.

Overview

  • Fresh milk supply in Victoria and New South Wales is expected to fall further than initially expected as a result of bushfires.
  • Global dairy prices have eased on the back of increased supply however demand remains strong in 2020.

Fresh milk supply is expected to decline significantly across New South Wales and Victoria in the coming months on top of what was already a challenging season. Bushfires are expected to cause ongoing issues for dairy farmers in these regions. In addition to the loss of animals, farms have been left without power and fuel making it difficult to continue operations, stalling cashflow and impacting profitability.

Global dairy prices declined in the last auction event of December driven by increased supply relative to demand. Milk powder prices were the softest with declines in Australian dollar terms of 6.6 per cent, the largest decline since March 2018. However fundamentally, demand for milk powder remains strong and it is likely prices will correct in the new year given global supply remains relatively flat. 

While supply and demand remain favourably balanced for price growth, trade terms for Australian exporters have weakened slightly.

The Australian dollar has appreciated against the U.S dollar, currently sitting around 70 USc, and has been trending higher since November. A higher Australian dollar makes Australian dairy exports more expensive relative to
competitors which has the potential to negatively impact export volume.

         

Source: Dairy Australia, Global Dairy Trade

 

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