More than halfway through the current dairy season, Australian milk production is firing on all cylinders.
Rabobank says widespread growth in milk supply across all dairying regions has been recorded due to favourable seasonal conditions and good farmgate margins.
In its recently-released Q1 Global Dairy Quarterly report, the agribusiness banking specialist said Australian milk production reached 5.35 billion litres from July 2023 to January 2024, 2.5 per cent year-on-year higher.
The bank said summer rainfall had far exceeded expectations across much of Australia’s east coast, providing a good platform for livestock producers.
Report co-author, Rabobank senior dairy analyst Michael Harvey said Australian dairy farmers were expected to enjoy a strong 2024.
“With milk prices remaining elevated, expectations are that new season pricing from July 1 will be margin-supportive,” Mr
Harvey said.
“And there is plenty of homegrown feed in storage, and purchased feed is affordable.”
Rabobank forecasts the Australian milk supply to finish the 2023/24 season (ending June 30) 2.6pc higher, with growth to continue into the new season in the range of three to four per cent for 2024/25.
Domestic market
Mr Harvey said the domestic Australian dairy market performance was stuttering, but was expected to improve in 2024.
“Australian household budgets remain strained, driving discretionary spending lower, which is flowing into the food basket,” he said.
“The financial health of Australian consumers is anticipated to improve as the year progresses, wages increase, tax cuts kick in and inflation normalises. And there are also potential interest rate cuts on the horizon.
“However, it is not all smooth sailing for consumers, with domestic economic growth for 2024 revised downward and unemployment revised upwards.”
Mr Harvey said disinflation is visible across Australian dairy grocery aisles.
“Still, consumer prices are 20 per cent higher than before the inflation cycle, resulting in trading down across the main categories,” he said.
Dairy exports
Rabobank said Australian dairy exports had been under pressure in the first six months of the season.
“Volumes were 8.5pc lower than last year, with significant declines for milk, whole milk powder and butteroil,” Mr Harvey said. “As milk supply grows into the new season, additional milk will be directed to manufacturing and potentially exports.
“Export competitiveness remains, but the gap between local and offshore farmgate milk prices has narrowed as milk prices in competitors’ regions increase on the back of improving commodity markets.”
