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Insights March 2022

15 March 2022 |Dairy
Dairy cow image

Insights March 2022

15 March 2022 |Dairy
The March 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:

  • Fonterra announced a step up of 20c/kg MS to its average farmgate milk price in February.
  • Global dairy prices continue to see strong growth with the GDT Index rising by 5.1 per cent at the first March auction.
  • Dairy Australia has revised its national milk production forecast for the season, now expecting a 1-3 per cent decline.

National milk production for the season to January was down 6.3 per cent year-on-year. Dairy Australia has recently revised its production forecast, now expecting a 1-3 per cent decline. Lower than expected production was partly due to a dry summer in the Southern dairy regions as well as a smaller national herd. It is a different story up north with severe flooding over the last two weeks in New South Wales and Queensland. This has affected over 100 dairy farmers according to Dairy Australia. The full impact of the floods on national milk supply is unknown at this stage with significant damage to farm infrastructure and herd numbers. There are also disruptions to supply chains as farmers dump milk due to power outages and milk trucks unable to access properties.

Global dairy prices have continued to see strong growth in the last month. The first Global Dairy Trade (GDT) auction for March saw an increase of 5.1 per cent to the GDT Index to US$1,593 per tonne. Similarly, Skim Milk Powder (SMP) increased 4.7 per cent month-on-month to US$6,394 per tonne. Cheddar prices also increased, up 10.9 per cent to US$6,394 per tonne. This has seen the SMP and cheddar price increase 35.7 per cent and 49.4 per cent year-on-year, respectively. The AUD has increased to 73c against the USD, a rise of 2c in the last month. The increase is reflective of inflation beginning to rise again, with dairy farmers already seeing margins being squeezed through higher input costs.

A dry summer in southern dairy regions has seen Fonterra announce a step up of 20c/kg MS on the 17th of February which is being retrospectively applied across the whole 2021/22 season. This follows the increase in its New Zealand forecast farmgate milk price range. The step up by Fonterra has led to a rise of 2c/kg MS to the average southern Australia farmgate milk price which now sits at $7.10/kg MS.

 

Sources: Global Dairy Trade, Dairy Australia

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