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Things Are Looking Up For Dairy Farmers

15 February 2010

AUSTRALIA - It’s a balancing act, but Australian dairy farmers should be cautiously optimistic over the coming months as milk prices improve and for most irrigators, water allocations look the best they have for four years.

The Situation and Outlook 2010 February Update, Dairy Australia’s barometer of the industry, released last week, states lower input costs – especially for grain which is at a three-year low – are also offering a more positive outlook for the industry.

Joanne Bills, Dairy Australia’s Manager Strategy and Knowledge, says the series of step ups in this season’s milk price in southern regions, has eased some burden on dairy farmers.

“Milk prices are improving for farmers in southern regions, input costs – especially for feed – are lower than this time last year, and water allocations on some irrigated systems are at four-year highs. With domestic dairy consumption robust, there is some cause for cautious optimism for the industry in 2010,” Ms Bills said.

However, she said, tough cash flow conditions throughout 2009 are tempering the improving market signals for farmers. “Increased financing costs, reflecting short-term debt incurred last year, plus the pressure of rising interest rates will maintain pressure on profit margins and the ability and willingness of farmers to respond to improved operating conditions by increasing production.”

While international fertilizer prices are firming, locally there are few limitations on feed supply, with good access to fodder of variable quality, and grain supply, offering flexibility for farmers. Internationally, dairying has recently seen demand and supply more tightly balanced.

Ian Halliday, new Managing Director at Dairy Australia, is optimistic that the outlook for the international market is reasonable. “Spot prices have increased significantly in US$ terms over the past 12 months and the global supply of milk available for export finished lower than expected in 2009,” said Mr Halliday.

“With our international dairy market now operating without EU or US export subsidies, dairying in Australia has been given a boost.”

“Although the international outlook is reasonably positive, higher commodity prices are testing demand in many key markets. There is a strong reliance on sustained economic recovery, especially in Japan, Europe and Russia and these fragile economies offer a mixed picture for the overall global outlook,” Mr Halliday said.

TheCattleSite News Desk


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