Despite a poor spring for many northern Victorian dairy farmers, the Australian industry is holding up well.
Strong farm finances, stable milk prices and a resilient domestic market for milk and yoghurt could help mitigate the effects of inflation and widespread spring flooding, according to the December 2022 Situation and Outlook report from Dairy Australia.
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Higher input prices, including fertiliser, and a shortage of labour remain two of the major issues for dairy farmers, on top of the spring flooding that spoilt crops and interrupted milk collections and farm access.
Dairy Australia has pointed to the Dairy Farm Monitor Project, which noted that profitability remained above long-term averages in 2021-22.
“This season, milk prices are, on average, higher and livestock trading conditions continue to be strong,” the latest report found.
“However, rises in key input costs could outweigh the increase in gross farm income.’’
An analysis of data by Dairy Australia found despite inflationary pressure, Australian consumers are still buying dairy — with sales of fresh milk and yoghurt up 0.3 per cent and 0.9 per cent respectively for the year to October 2022.
Rather than forego dairy, consumers have begun to adjust their purchase decisions — buying ‘specials’ and trading down to private label products.
Dairy remains a staple, with 98 per cent of Australian households buying milk.
“The report found staffing is still an issue and identified an increased reliance on farm owners and family members as unpaid labour,” Dairy Australia’s industry insights and analysis manager John Droppert said.
A table from the Dairy Australia Situation and Outlook report showing rising fertilser costs over last year (LY) and compared to five years ago (5Y).
“We have also seen a greater investment in labour saving technologies such as robotic milking systems and cow monitoring collars.”
The full impact of flooding on forward milk volumes is difficult to assess at the current time, yet Australia’s milk production outlook for 2022-23 will almost certainly be revised downwards.
There have also been significant impacts on grain and silage supplies.
“While there is potential for opportunistic access to downgraded product, the overall effect will likely push feed prices higher — especially for high-quality product,” Mr Droppert said.
Competing dairy export regions face challenges as well.
Dairy Australia says New Zealand’s milk production has lagged the previous season through spring, coming in 3.4 per cent lower in October, and 3.6 per cent down for the season to date.
In NZ, slower growing and lower quality pastures (due to wet conditions) have created significant limitations across the North Island in particular, while the South Island has been less affected.
High supplementary feed costs, together with labour shortages, are also key concerns in Australia’s neighbour.
From the Dairy Australia Situation and Outlook report, showing the water costs for last year (LY) and five years ago (5Y).
