Many were adamant that the value-add capture on top of the commodity value price, plus competition, would lift the price higher, with many hoping it had “at least” a five in front of it.
But many producers were shaken by the news, from dairy forecasting organisation Freshagenda, which said the outlook reflected a glut of milk in the EU and resulting challenges to cheese markets.
Gippsland based consultant John Mulvany was circumspect about the forecast.
“If the people who actually pay dairy farmers were signalling the price could be below $5 a kilogram of milk solids next year then that’s obviously going to shake enthusiasm and confidence,” he said.
“But there is still such a massive range of how people produce milk and at what cost. It is very hard to generalise across the industry what the impact would be.”
At the Sungold Field Days at Allansford last week, bank representatives said farmers were cautious about the coming season.
Rural Bank south west agribusiness regional manager Andrew Martin said the season last year helped dairy farmers, with levels and appetite for investment varying “case by case” but he said farmers were now “pensive” next year about the milk price.
“There’s a point where businesses need to break even. Depending on the business, a four might challenge that break-even price,” he said.
Westpac Victoria and Tasmania agribusiness general manager Roddy Brown said many clients had consolidated this year, managing on-farm efficiencies well. He said next year’s price was “looking a bit dicey” but he was confident it would have a five in front of it.
“I think people are starting to think more long term, more strategic, but they still have got to get through the year,” he said.
Mr Brown said there had been a lot of corporate investment in Tasmania, with pension funds investing in a hybrid system that still included family investment in dairy. In Victoria two to three dairy farmers had “fired up” another dairy on an outblock, he said, but that farmers had “their eyes up” when it came to markets.
He estimated it would take longer than this season to return each Victorian dairy region to historic production levels. “Generally people have been rebuilding numbers and looking at efficiencies,” he said.
“The focus has been on efficiencies, not necessarily production.” ANZ south west Victoria regional executive Dale Camm said confidence was “lukewarm” with efficient operators reinvesting in their business, some consolidating and spending money on infrastructure. Dairy Australia analyst John Droppert said last week’s rise of 5.9 per cent to an average of $US3553 a tonne at the Global Dairy Trade auction reflected the “drought” in New Zealand and its impact on production figures. He said the auction also “reinforced” that buyers were prepared to pay a premium for Oceania skim milk powder. SMP rose 7.2 per cent to $US1932/tonne at the auction and it is due to a huge EU stockpile that needs to be sold down.