Increase in Australia’s milk production forecast to continue

Posted by AFN Staff Writers on 15th February 2012
Dairy Australia’s latest forecast, released today, shows that Australia’s milk production is continuing to climb, with total output for 2011-12 forecast to be between 9.4 and 9.5 billion litres, up on last season’s total of 9.1 billion litres.
Dairy Australia’s Situation and Outlook report shows that Australia’s milk production was up 3.6 per cent on last season for the six months to December 2011, at 5.6 billion litres.Dairy Australia Manager, Strategy and Knowledge Joanne Bills said she expects the trend to continue. She said, “Generally favourable seasonal conditions, lower feed costs, good soil moisture levels and high water allocations should support profit margins and make this season one of consolidation for most dairy farmers in southern exporting regions.

“Northern and western Victoria, and southern NSW are enjoying the best conditions for many years, and Tasmanian production remains strong.”

Milking cows in short supply

Ms Bills said milking cows remain in short supply and retention rather than export of heifers would be critical to maintaining future production growth.

According to Dairy Australia, live cattle exports have slowed, down 4 per cent to 73,900 in the 12 months to December 2011.

Global outlook

Ms Bills said that, on a global scale, while dairy markets have been remarkably stable, the wider economic situation remains uncertain.

“Currency movements are impacting the competitiveness of exporters. The high Australian dollar will continue to limit returns to local exporters, while EU exports are becoming increasingly competitive and exports more attractive for US manufacturers,” Ms Bills said.

“Dairy Australia modelling indicates an increase in the Australian dollar from 105 to 110 US cents would reduce farmgate prices by 2.2 cents per litre. Exchange rates will have an impact on 201213 farmgate prices, as exporters have hedged a large proportion of current season sales, but will be more exposed to high and changeable exchange rates in the coming year.”

Farmgate milk price estimated

Analysis undertaken as part of the Situation and Outlook Update suggests a likely final average southern Australian farmgate milk price range of AU$5.20 to AU$5.30 per kilogram of milk solids for the 2011/12 season.