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USDA GAIN: Dairy and Products


23 May 2012

USDA GAIN: Australia Dairy and Products Semi-Annual 2012USDA GAIN: Australia Dairy and Products Semi-Annual 2012

Two consecutive years of record rainfall in eastern Australia have sharply improved pasture conditions and fully replenished supplies of irrigation water for the Australian dairy industry. Despite the recent sharp improvement in production conditions, the rebound in dairy production in Australia has been sluggish. The production of fluid milk in CY 2012 is expected to increase just three percent year-on-year following a smaller increase for CY 2011. On the positive side, cow numbers have begun to increase as-well-as milk yield per cow and this is likely to continue well beyond the forecast period. The trade remains “cautiously optimistic” over the longer-term as the Australian dairy industry makes “modest” improvements in production and productivity.
USDA Gain Report - Dairy and Products

Commodities:

Dairy, Milk, Fluid
Dairy, Cheese
Dairy, Butter
Dairy, Dry Whole Milk Powder
Dairy, Milk, Nonfat Dry

Dairy Cow Numbers

Total cows in milk are forecast at 1.65 million head, up 1.85 percent from the previous year in response to sharply improved pasture conditions and fodder supply. Record breaking rainfall combined with a significant decline in domestic feed grain prices allowed cow numbers to expand slightly beyond those in Post’s previous report.

Despite this, total cow numbers continue to remain well below those recorded prior to the record breaking drought and further increases in herd numbers are expected to be modest.

Dairy Cattle (000' head)

Recent improvements in farm gate milk prices have also assisted in the expansion of the herd and restored some confidence in the long term outlook of the industry. However, further increases in farm gate prices will likely be constrained (at least partially) by the historically high and at times record value of the Australian dollar.

AU/US Exchange Rate
(AU$ in US Cents)

Dairy, Milk, Fluid

Production

Total fluid milk production for CY 2012 is forecast at 9.85 MMT, up 3 percent from last year’s estimated level of production. A second season of record breaking rainfall and flooding has seen total number of cows and average yield per cow increase and this has led to the slight upward revision in the milk production forecast.

Of particular interest is the significant decline in local feed grain prices toward the end of 2011. Record wheat production, as well as other crops, combined with difficult harvesting conditions (due to wet weather at harvest) sharply increased domestic supplies of downgraded wheat for use as feed grain – subsequently, costs of purchased feed grain have fallen significantly leading into CY 2012. This has done much to “sure-up” dairy production volumes in CY 2012.

Monthly Milk Supply (Million Litres)

Fluid milk production for CY 2011 has also been revised upwards slightly and is estimated at 9.56 MMT, due to increased cow numbers and increased yield.

Australian Dairy Prices (Milk Price Index)

Dairy, Cheese

Total cheese production in 2012 is forecast at 345 TMT, up about 4 percent from the 2011 estimated level of production. This figure is driven by the increase in fluid milk available for manufacturing and firmer pricing compared with other dairy commodities. Long term trends show fluid milk consumption remaining relatively flat (with only small and incremental year-to-year increases in demand) therefore the majority of growth in total fluid milk production will have to be directed towards manufacturing.

Total Milk Production and Usage (Million Liters)

Total cheese production CY 2011 has been revised upwards to 332 TMT, in line with increases indicated by industry data. Higher returns for cheese over the past decade have allowed cheese production to remain relatively stable despite earlier falls in fluid milk supply.

Australian Cheese Production and Exports (TMT)

Dairy, Butter

Total butter production for CY 2012 is forecast at 129 TMT, up slightly on the revised estimate of 127 TMT for the previous year. An increase in fluid milk supply is expected to see butter production rise slightly despite the long term declining trend in production. Long term trends in consumer consumption patterns have seen butter production trending downwards.

Australian Butter Production and Exports (TMT)

Total butter exports for CY 2012 are forecast at 65 TMT, up sharply from the revised estimate for the previous year. Increasing closing stocks, due to poorer export performance estimated in CY 2011 is expected to push 2012 exports upwards, closer to the long-term-average.

The production and export series for butter has been revised, in line with recently received industry data.

Dairy, Dry Whole Milk Powder

Production of whole milk powder in 2012 is forecast at 154 TMT, up about 4 percent from last year and in-line with the increase in fluid milk supply. WMP prices are expected to decline slightly going forward and this is expected to constrain production and export volumes. Production for CY 2011 has been revised downwards slightly to 148 TMT in line with recently released industry data.

Australian Whole Milk Powder Production and Exports (TMT)

Exports in 2012 are forecast at 116 TMT. The high value of the Australian dollar has caused a downward revision of exports across the series, while revising stocks upwards. This revision is supported by industry data.

Dairy, Skim Milk Powder (SMP)

Total skim milk powder production for CY 2012 is forecast at 240 TMT, largely unchanged from the previous year. However, exports have been increased significantly for CY 2012 to 160 TMT. Domestic consumption and closing stock numbers have been increased across the series due to lower than expected export performance driven by a historically high, and at times record value of the Australian dollar.

Australian Skim Milk Powder Production and Exports (TMT)

May 2012

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