Dairy Australia sees improving signs after tumultuous year

Posted by Isobel Drake on 8th October 2009

Many Australian dairy farmers are currently operating at or below break-even levels with 95% having their farmgate price significantly reduced in 2009, a Dairy Australia survey has found.Analysis undertaken by Dairy Australia as part of the 2009 Situation and Outlook Update has highlighted that, although farmers were doing it very tough in September, there are signs of market recovery with input costs easing and some good mid-spring rainfall assisting farm margins in many regions.

Dairy Australia’s Manager Strategy and Knowledge Jo Bills said 340 farmers who participated in the March National Dairy Farmer Survey were re-contacted in September to update any changes and outlook – an input into the Situation and Outlook update.

“September was a particularly low point for dairy farmers,” Bills advised. “Many told us they were facing immediate challenges managing their cash flow and dealing with highly variable spring weather conditions.”

“However since September we have seen a round of step ups in milk prices by major manufacturing companies as well as an increase in rain and better water allocations and weakening feed prices, so things are looking slightly better in some regions.”

As well as good spring rains in some parts, international dairy commodity prices have increased.

Dairy Australia Managing Director Mike Ginnivan said market surveys have shown increases for several months now.

“We are seeing increased demand in key Australian dairy markets such as the Middle East and South East Asia, so there are good signs of ongoing recovery for dairy prices. This has been supported by the globalDairy Trade results for whole milk powder (WMP) which indicate sustained demand from buyers into next year at higher prices,” he advised.

“At this stage the main risk to farmgate prices is the strong Australian dollar.”

The dairy sector has been one of the hardest hit by the global financial crisis, with prices crashing after a strong run up in the first half of last year.

The collapse has forced many to reconsider their future in the sector and could impact supply in the future. Indeed, the Dairy Australia survey showed 16 per cent were considering leaving the industry in the next three years (up from just 3 % in March). However, 60 per cent remained positive about the future.

“We know dairy farmers are really hanging on at the moment and have been forced to implement a range of management responses to help get them through,” Dr Ginnivan added. “But we believe we have seen the bottoming of the international dairy market, and with feed prices, irrigation allocations moving in the right direction, and improved seasonal conditions in some regions the outlook is more positive for many farmers.”