Insights May 2023
Insights May 2023
- Australian milk production remains below average and full season production is likely to be 8-8.2 billion litres.
- Global dairy prices have lifted in the past two auctions, with most products now sitting around five-year averages.
- New season farmgate prices are due to be announced this month, with producers keeping a close eye on markets.
Australian milk production in March lifted 4.8 per cent month-on-month. However, this follows normal seasonal trends rather than signifying a turnaround of low production. Season to date milk production remains 6.2 per cent down on last year, and 8.3 per cent below the five-year average. Victorian production still seems to be suffering from the lingering effects of flooding. Victorian milk production in March was 5.8 per cent below last year, the largest decline of any state.
Domestic demand for milk remains firm, but local consumption is facing some headwinds. Australia ranks in the top five nations for drinking milk consumption. But domestic milk consumption has been on a steady decline since peaking in 2012/13. This is understood to be a trend attributed to changing dietary habits which looks set to continue. Along with this, increased cost of living pressures are weighing on consumer demand.
In some good news for Australian producers, global dairy prices have lifted in the two most recent Global Dairy Trade auctions. Butter, cheddar and both whole and skim milk powder recorded consecutive increases. This brings all categories above the five-year average in Australian dollar terms. North Asia was again a major buyer, but demand was also seen from the Middle East and South-East Asia. Improved global demand is a positive sign, but this interest could be due to buyers taking advantage of lower prices. Global supply looks sufficient for now, so it is yet to be seen if prices will continue to appreciate.
Australian processors will be releasing new season farmgate milk prices in coming weeks with the June 1 deadline looming. The recent increase in global prices adds weight to growers hopes of higher opening prices than last year. Last year, opening farmgate milk prices were around the $7-$8/kg MS mark. That soon escalated with step ups to current prices over $10/kg MS. With shrinking local production, processors will be weighing up how they can attract required supply while still remaining competitive in domestic and export markets. Hopes of opening prices around $9/kg MS were fading with easing global dairy prices. But recent lifts in global dairy prices means it is not out of the question. Processors will be keeping a close eye on the market in the lead up to the new season.
Sources: Global Dairy Trade, Dairy Australia
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