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Insights October 2021

11 October 2021 |Dairy
Dairy cow image

Insights October 2021

11 October 2021 |Dairy
The October 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

  • No further step-ups to opening milk prices for 2021/22 have been announced since last month
  • Drier conditions throughout August improved production conditions with Australian milk production rising 13.8 per cent.
  • Global demand has been relatively steady throughout Asia and China in particular, helping to support values.

No further step-ups to opening milk prices for 2021/22 have been announced since last month. The average milk price from major southern processors remains at $6.98/kg MS, a 3.8 per cent increase from initial 2020/21 prices.

Drier weather throughout August improved production conditions. Australian milk production rose 13.8 per cent as a result. Despite this rise, national production remained 3.6 per cent below the corresponding period last year. Wet weather across the east coast throughout September may continue to improve production.

Milk supply is forecast to remain steady to slightly higher in the 2021/22 season. Dairy Australia has forecast growth of between zero and two per cent for the year. This would mean a national milk pool of 8.8 to 9 billion litres. A wet spring and improving global dairy prices will hold dairy farmers in good stead. The Bureau of Meteorology are forecasting above average rainfall over the next couple of months across the east coast. This should see plenty of water availability and pasture growth. Despite these positive growth forecasts, challenges do remain. Logistical difficulties for Australian producers are increasing with shipping congestion continuing to worsen.  A fall in demand for dairy throughout food service outlets has also been recorded following lockdowns in New South Wales and Victoria. It’s hoped that foodservice demand will rebound over the coming months as lockdowns come to an end.

Global dairy prices continued their highs over the past month as many countries experience a softening in production. New Zealand, and the EU have seen a slowdown in production due to cold, wet weather with production down four percent and 0.1 percent respectively. Both the US and China are experiencing constraints in the face of low feed availability pushing costs upwards. Demand has continued to be steady throughout Asia however, this could start to slip away. Milk powder exports to China fell away in July as their supply starts to outstrip demand. Yet, the average skim milk powder price in September increased 3.2 per cent month-on-month and prices remained well above the 10-year average. Cheddar prices also rose throughout August with the monthly average rising 1.4 per cent. While a fall in demand from China has been anticipated for some time, the consequences have yet to be seen. Increasing supply throughout China is likely to see import demand slowdown in the back half of 2021. The primary risk to dairy prices continues to remain that potential drop off in demand which would see prices soften considerably.

A graph showing skim milk powder price movements for three periods: 2019, 2020 and 2021. Prices remains on the steady increase throughout the month of September.  A graph showing cheddar price movements for three periods: 2019, 2020 and 2021. This month cheddar prices increased and sits above the same value in 2019.

Source: Global Dairy Trade


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