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Insights November 2020

9 November 2020 |Dairy
Dairy cow image

Insights November 2020

9 November 2020 |Dairy
The November 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

  • Wet conditions over the East coast continue to provide an outlook of low input costs heading into the warmer months.
  • Southern hemisphere milk powder is hitting the global market as China continues to purchase in higher volumes compared to this time last year.
  • Dairy export markets are likely to face some uncertainty this month as many European countries enter stricter lockdowns in response to rising COVID-19 cases. The cause for concern centres around tighter consumer spending in response to economic uncertainty.

From a weather perspective it was more of the same in October for the East coast of Australia. Average to above average rainfall has compounded the already damp conditions on farm and has led to interruptions in hay production. In Northern Victoria, lower water prices will assist farmers to grow fodder over summer, increasing supply relative to 2019/20. Gippsland, South West Victoria and Tasmania are expected to make the most of their pasture-based systems decreasing the need for supplementary feed and boosting supply and profitability.

Global dairy prices were mixed during October and early November. Skim milk powder prices decreased 3.9 per cent in the last two auctions while the price of cheddar increased 3.7 per cent. Milk powder availability is increasing, driven by southern hemisphere production. Demand from North Asia remains slightly above this time last year, led by China and their desire to increase stocks. This trend is expected to continue in November. In contrast, South East Asian demand is lower than this time last year, with year to date volume down 14.1 per cent. The decline in demand from South East Asia is due in part to a relatively high price compared to historic levels.

Cheddar prices firmed on the back of tighter supply during October and the first week of November. It’s likely that prices will see a small correction once southern hemisphere supply flows through this month. However, there is some risk surrounding demand from Europe as more countries enter stricter lockdowns which could result in decreased consumer spending due to economic uncertainty.

 

Source: Global Dairy Trade

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