Insights October 2020
Insights October 2020
- Wet conditions are likely to persist over the coming months which is mostly positive news for milk supply and cost of production. However, there are risks associated with a wet outlook that will have to be managed.
- Supplementary feed availability is about to increase as the fodder season gets underway. Sunny days will become increasingly important as most regions will have more than enough rainfall.
- Global dairy prices have lifted in the past two auctions, driven by a decline in offerings ahead of the Southern Hemisphere spring peak. Asian countries are on track with their traditional buying cycle which will be important for price stability in the coming months.
Exceptional weather conditions in southern states continues to promote pasture growth which is translating to milk supply growth. Several Tasmanian dairy farmers have reported record milk volumes on a per cow basis for this time of year, driven by favourable seasonal conditions. The three-month rainfall outlook to December is showing a greater than 75 per cent chance of exceeding the median for almost every region of Australia. While this is largely positive, there is a risk of paddocks becoming too wet degrading soil structure and pasture quality.
From a feed perspective, silage yield and quality are expected to be high in most regions particularly Gippsland and South West Victoria. However, there is a risk of spoilage should wet conditions persist without adequate breaks in the weather. Feed grain prices remain in a pre-harvest lull but are expected to come under pressure due to increased supply and the prospect of lower quality grain should a wet harvest eventuate. The Australian feed barely index is down $82/t compared to this time last year. In hay markets, prices remain flat at around $25/t below the five-year average in South West Victoria. In contrast, hay prices in Tasmania are around $15/t higher driven by low stocks prior to new season hay becoming available.
Demand for finished dairy products has increased, driven by a decline in offerings ahead of the Southern Hemisphere spring peak. Skim milk powder price increased 8.3 per cent in the last two auctions while the price of cheddar increased 8.1 per cent. Both categories are reaching year ago levels despite a long period of decline in 2020. Asian countries have commenced their traditional buying cycle for milk powder which runs from August to December. Demand is expected to remain robust however increasing supply from New Zealand and Australia could temper price growth over the next two months.
Source: Global Dairy Trade