Insights November 2021
Insights November 2021
- Both Fonterra Australia and Saputo Dairy announced step ups to their average farmgate milk prices for the 2021/22 season.
- National milk production rose 22 per cent during September but was 2.9 per cent below last season.
- Strong production throughout China has seen reduced export demand, particularly for Skim Milk Powder.
October saw both Fonterra Australia and Saputo Dairy announce step ups to their average farmgate milk prices for the 2021/22 season. Fontera’s average price has risen to $7.10 kg/MS while Saputo also announced a 10-cent increase to $7.05 kg/MS. Due to these step ups, the average milk price from major southern processors increased by four cents to $7.02/kg MS, a 0.6 per cent increase from last month’s prices. The step up in prices has been driven by subdued growth in supply and strong domestic demand.
The Australian dairy industry is positioned well as spring progresses. National milk production increased by 22 per cent in September. Despite this increase, national milk production during September was still 2.9 per cent below last season. Year to date production was also 3.3 per cent behind 2020/21 production. This reduction in production compared to last year has been driven by a wetter than normal season. Dairy producers throughout southern Victoria and the Gippsland region have been particularly impacted by the wetter than average weather. Reduced milk production has been seen throughout Victoria, Western Australia, and Tasmania. On the other hand, production New South Wales was up by 2.7 per cent. Queensland and South Australia also had increased production compared to last season.
Dairy Australia’s supply growth forecast remains between zero and two per cent for the year. This would mean a national milk pool of 8.8 to 9 billion litres. The easing of restrictions throughout New South Wales and Victoria has seen foodservice demand improve. This is expected to hold domestic demand in good stead over the coming quarter. Despite improving demand, challenges within the industry still remain. Logistical difficulties will persist as COVID-19 continues to impact supply chains. The wetter than usual spring is also proving a challenge. It is hoped the strong soil moisture levels will lead to stronger production in the back half of the season.
Global dairy prices continued to surge over the past month. This was due to further falls in New Zealand milk production and declining dairy cow numbers across the US. A general weakness in global production will continue to support prices over the short term. Dairy exports to China declined for the second month in a row as demand continued to falter. Despite this, the average skim milk powder price in September increased six per cent month-on-month with prices now 21.4 per cent above the corresponding period last season. Cheddar prices also rose throughout September, with the monthly average rising 14.1 per cent. As has previously been noted, production within China is now increasing. This will see import demand continue to slow down over the coming months. Global prices may also begin to drop off if the trend in declining Chinese demand continues, particularly given the high-level prices are currently sitting at.
Source: Global Dairy Trade