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Insights February 2022

14 February 2022 |Dairy
Dairy cow image

Insights February 2022

14 February 2022 |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.

Commodity overview:

  • Burra Foods announced a step up of 10c/kg MS to its farm-gate milk prices in early January.
  • Australian milk production is unlikely to see year-on-year growth with supply currently down 2.2 per cent on last season.
  • Global dairy prices have continued to rise with a further 4.1 per cent rise to the GDT Index at the first February auction.

National milk production for the 2021/22 season has remained lower than initially forecast. The primary reason for this was cold and wet weather throughout winter which has affected the quality of pasture available. This has lowered per-cow production in Victoria and Tasmania. The second reason is ongoing labour shortages across the broader agricultural industry. This has created strong competition for an already limited labour force. Milk production for the season to December was down 2.2 per cent compared to 2020/21 and 3.6 per cent lower than the five-year average. Production for the full season was initially forecast to grow by 1-2 per cent however poorer than expected production through spring means that year-on-year growth is unlikely to occur.

Global dairy prices continued to rise strongly through January and into February. This was largely due to global supply pressures across major dairy exporters. The first Global Dairy Trade (GDT) auction for February saw another price leap with the GDT Index going up 4.1 per cent to a price of US$4,630/tonne. Cheddar prices improved to US$7,900/tonne, a rise of 5.7 per cent month-on-month. Skim milk powder prices also increased by 9.6 per cent month-on-month to US$5,630/tonne. Global dairy prices for cheddar have increased over 45 per cent year-on-year, whilst skim milk powder prices have improved 36.6 per cent. The Australian dollar remained relatively flat across January at 71USc. This was supportive for dairy exports.

Weakened growth in global supply and strong demand has seen milk processors announce step-ups to farmgate prices. In January, Burra Foods announced a 10c/kg MS lift which is being retrospectively applied across the full 2021/22 season. The Southern Australia farm gate milk price is currently sitting at $7.08/kg MS achieving year-on-year growth of 4.8 per cent. In New Zealand, Fonterra recently raised its forecast farm gate milk price range to a new record high of NZ$8.90-9.50/kg MS. This suggests there is some potential upside to farm gate prices for Australian dairy farmers.


Sources: Global Dairy Trade, Dairy Australia


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