Record Rainfall has Helped Boost Dairy Industry

AUSTRALIA - 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. Backto-back record production levels for wheat and cotton have also sharply increased the supplies of both grain and other commodity bi-products (such as cotton seed meal) for use as dairy fodder.

25 May 2012

3 minute read

Oceania

High rainfall, improved pasture conditions and sharp increases in fodder availability have followed the worst drought in recorded history. The drought, which began in CY 2002 and continued until Christmas day 2009, depleted fodder and irrigation water reserves to their lowest levels in living memory. As a consequence, the Australian dairy sector witnessed a decline in cattle numbers and milk yield per cow during this period.

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. These are but modest increases when the transition from the worst conditions on record to some of the best conditions on record is taken into account.

Despite greatly improved climatic conditions, the Australian Dairy Industry continues to be constrained by high relative costs for other farm inputs such as labor. Conversely, the historically high Australian dollar, which has been climbing steadily since CY 2008 and recently reached new record levels, continues to constrain exports and limit farm gate prices for fluid Milk.

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.

The production and export series for some commodities have also been significantly revised, in line with recently received industry data. In response to the high Australian dollar the export series of key dairy commodities have been revised downwards and closing stocks adjusted upwards in line with industry gathered raw data. Official stock numbers are unavailable, however, anecdotal evidence suggests that stocks of dairy commodities have increased due to the high value of the Australian dollar and the subsequent constraints on export performance.

Rainfall and Flooding in Eastern Australia

Eastern Australia has been experiencing “La Nina” weather conditions over the past two years and this has bought widespread heavy rainfall and in the worst affected areas severe flooding. Many records have been surpassed during this period – including the wettest seven day period on record. For the most intensively farmed agricultural regions of eastern Australia, this flooding event is regarded as similar to that of the early 1970’s and the 1950’s. However, this event has been even more severe for other less well known areas of inland Australia.

Heavy rains and flooding have completely replenished previously depleted irrigation water storage dams. During nearly eight years of drought irrigation water availability steadily declined reaching zero for many irrigated farms. The chart below shows the dramatic improvement in irrigation water storage since the drought began to break at the end of CY 2009. This improvement is likely to see production of irrigated crops return to levels more reflective of the longer term average.