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Insights September 2021

16 September 2021 |Dairy
Dairy cow image

Insights September 2021

16 September 2021 |Dairy
The September 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

  • Step-ups to opening milk prices saw the average southern milk price increase 3.8 per cent from initial announcements.
  • Good rainfall will drive a modest increase in Australian milk production in 2021/22.
  • Global fundamentals remain favourable as demand growth is likely to outpace supply growth.

No further step-ups to opening milk prices for 2021/22 were 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.

Despite a slight rise in production throughout New South Wales and Victoria, Australian milk production fell 3.5 per cent throughout July. This was driven by wet weather, particularly throughout southern production regions. Milk production for the 2020/21 season ended 0.6 per cent higher than 2019/20 but remained below the 5-year average by 1.7 per cent.

Dairy supply is forecast to remain relatively steady to slightly higher in the 2021/22 season. Dairy Australia has forecast growth of only two per cent for the year. Seasonal conditions remain favourable in the back half of 2021. Import demand from China remains the primary price driver with some uncertainty as to if this demand can be maintained.

Global dairy prices rebounded throughout the month of August after recording a slight dip in July. Dairy prices have been buoyant in the face of COVID-19 uncertainties. Demand has been relatively steady throughout Asia and China in particular, helping to support values. This has ensured dairy prices remain strong in comparison to historical averages. The average skim milk powder price in August increased 5.7 per cent month-on-month. Strong demand throughout Asia ensured prices have remained well above the 10-year average. While a fall in demand from China has been anticipated for some time, this has yet to occur. Increasing supply throughout China is likely to see import demand slowdown in the back half of 2021. Cheddar prices also rose throughout August with the monthly average rising 1.9 per cent from July. Global milk supply is expected to continue to rise over the coming months though at a more modest pace than previously forecast. The primary risk to dairy prices remains a drop off in demand which would see prices fall away rather quickly.

 

Source: Global Dairy Trade

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