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Insights February 2021

8 February 2021 |Dairy
Dairy cow image

Insights February 2021

8 February 2021 |Dairy
The February 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

  • Milk supply is likely to ramp up in the lead up to autumn as wet conditions persist in Southern states.
  • Chinese demand for dairy products has led to a strong start in 2021 across all dairy categories.

Supply wasn’t as high as many were expecting over summer in both Australia and New Zealand however favourable conditions continue to provide opportunities for growth. In Victoria, wet conditions and mild temperatures have prolonged pasture growth which has led to farmers retaining supplementary feed, in particular hay, in comparison to previous years. Supplementary feed grain is proving more difficult to obtain this season, particularly in North East Victoria where farmers are storing grain in a bid to maximise price. Access to casual labour is proving challenging across all regions putting some extra strain on family run farms.

Input prices remain below this time last year however grain prices are rallying. Feed grain prices found support in January, with barley rising $20/t, dragged higher by world export demand for wheat which has increased $22/t. Hay prices declined in January as supply remains high, across Victoria pasture hay slipped $30-35/t. Temporary water prices eased further in December because of increased supply from wet conditions.

Overall, optimism high remains for the coming month as the sector looks to enter autumn with a lower cost of production and positive signs for milk price with a step up from Norco reinforcing the positive performance of the industry in 2020-21.

As expected, China have ramped up dairy product purchasing to sure up stockpiles. Milk powder has been the most in demand product with prices rising $259/t in the past month. However, as the price of skim milk powder climbs there will be a level of sensitivity for some buyers, there was some evidence of this in the first auction event for February where buyers retreated as prices became too expensive. It’s expected that prices for milk powder will remain supported for the next few months until Northern hemisphere milk production ramps up.

Overall, the global market is experiencing strong demand for most finished products with current prices for SMP and cheddar sitting well above the five-year average.

   

Source: Global Dairy Trade

 

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