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Insights April 2024

8 April 2024 |Dairy

Insights April 2024

8 April 2024 |Dairy
The April update provides an analysis of production and pricing trends for Australian dairy producers.

Commodity Overview

  • Easing input costs, stronger global pricing and positive seasonal conditions provide a broadly optimistic outlook for dairy producers heading into the 2024/25 season.
  • The Global Dairy Trade Index has lifted in April reversing declines in March to currently sit 12.4 per cent above this time last year.

Season to date (July ’23 to January ’24) national milk production of 5.35 billion litres is up 2.4 per cent year-on-year. Monthly milk production has consistently improved on last season. Timely rainfall in eastern states through summer has improved prospects. Water for irrigation is cheap and rainfall has built soil moisture and been beneficial for pasture growth.  A positive outlook for the remainder of this season has seen our forecast for 2023/24 season lifted from around 8.2 billion litres to 8.35 billion litres. This would be a 2.6 per cent increase on 2022/23 production of 8.14, but still 2.7 per cent below the five-year average.

Following six consecutive gains, the Global Dairy Trade (GDT) Index fell across both trading events in March. The GDT Index lifted 11.0 per cent over the six events but lost 5.1 per cent in the two March events. The most recent trading event on 2 April saw a reversal of the downward momentum with the Index lifting 2.7 per cent. There are some caveats though. A total of 18,737mt of product was sold, the lowest figure in over four years and down 21.4 per cent year-on-year. This demonstrates the lacklustre demand in the global dairy trade at the moment. The low quantity purchased could indicate opportunistic buying following a price slump.  Despite flat global demand, global dairy prices have continued to strengthen. The GDT Index currently sits 12.4 per cent above this time last year, which will be important when local processors set new season opening farmgate prices.

The U.S. Department of Agriculture (USDA) has confirmed the detection of Highly Pathogenic Avian Influenza (HPAI) in dairy herds in Michigan, Texas and Kansas. Positive test results are also understood to have been received in New Mexico and Idaho. While HPAI presents no concerns about the safety of milk because products are pasteurised, it can affect milk production in cows. Symptoms include decreased lactation, low appetite and other symptoms among primarily older cows. The USDA claims milk loss resulting from symptomatic cattle is too limited to have a major impact on supply. US milk production is expected to rise slightly in 2024. A smaller herd than last year has year-to-date production just 0.6 per cent above 2023. But HPAI is highly contagious, so the situation is being monitored closely.

The short-term outlook for Australian dairy is broadly optimistic. Farmgate prices are at record levels, input costs have settled (though remain elevated). Climatic conditions are mostly favourable, global production remains flat and international prices are recovering. Some headwinds remain in ongoing labour challenges, a stagnant global economy and flat demand. But 2023/24 was a profitable season for many producers. Stabilising local milk supply, improved global prices and a positive weather outlook have boosted confidence as we approach the new season.

A graph showing global prices for skim milk powder and cheddar from November 2021 to March 2024. Skim milk powder saw some price declines last month while cheddar edged higher.
A graph showing monthly milk production in Australia for the last three seasons. National milk production in January 2024 was a 4.8 per cent increase on January 2023.

Sources: Global Dairy Trade, Dairy Australia

This article is intended to provide general information on a particular subject or subjects and is not an exhaustive treatment of such subject(s). The information herein is believed to be reliable and has been obtained from public sources believed to be reliable. Rural Bank, a Division of Bendigo and Adelaide Bank Limited, ABN 11 068 049 178 AFSL/Australian Credit Licence 237879, makes no representation as to or accepts any responsibility for the accuracy or completeness of information contained in this report. Any opinions, estimates and projections in this report do not necessarily reflect the opinions of Rural Bank and are subject to change without notice. Rural Bank has no obligation to update, modify or amend this article or to otherwise notify a recipient thereof in the event that any opinion, forecast or estimate set forth therein, changes or subsequently becomes inaccurate. This article is provided for informational purposes only. The information contained in this article does not take into account your personal circumstances and should not be relied upon without consulting your legal, financial, tax or other appropriate professional.

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