DAIRY Australia has held its milk production growth forecast at 2 to 3 per cent this season following contained input costs and modest farmgate price improvements.
By: SIMONE SMITH
Source: The Weekly Times
Its Situation and Outlook report, released today, estimates Australian dairy farmers will produce about 9.2 billion litres this season.
The Dairy Australia report said supply competition, overcapacity and oversupply continued to dominate the fertiliser industry, keeping Australian prices “under pressure” despite escalating gas prices for local manufacturers.
Urea producers had cut back production in the past few months due to “chronic oversupply” and this resulted in August prices 9 per cent higher than the same time last year.
Dairy Australia reported urea production was expected to increase later this year.
Northern Victorian irrigation water prices increased from $41 a megalitre in June, to $115/ML in July and then to $126/ML in August.
The August price was 4 per cent less than the same time last year, according to Dairy Australia. The report said in the 12 months to August there were 75,000 cows culled compared with 109,000 the year before.
This 31 per cent year-on-year decline is also 2 per cent below average five-year culling rates. In August the 5700 dairy cattle passed through saleyards, the lowest number since April, according to the report.
In the year to August prices dropped 17 per cent to 426c /kg (carcass weight), the lowest since May last year, but 16 per cent up on the five-year average.
Dairy cattle exports are down 3 per cent on last year, but down 30 per cent on the five-year average, according to Dairy Australia.
And hay prices across Victoria were down between 31 and 55 per cent in August, with grain prices holding or down 2 per cent that month, it said.
The level of growth forecast for Australia is less than major competitors New Zealand, the US and EU, according to the Situation and Outlook report.
EU production growth has been slow due to poor conditions during the northern spring and summer, but higher farmgate prices have encouraged a return to growth. Milk production in the EU was up 2.1 per cent for July, compared with July 2016.
France, Germany and the Netherland remain below year-ago levels, while Italy, Poland and the UK are recording increases.
In New Zealand, the post- downturn recovery has recently started to “gather pace”.
NZ started the current season with a forecast of $NZ6.75/kg/MS, which equates to about $A6.65/kg/MS.
For the first three months of the season milk production grew by 1.6 per cent, “however, this period represents only 8 per cent of NZ annual milk intakes”, the report said.
Meanwhile, Rabobank has forecast a milk production lift of 2.5 per cent in Australia this season and expects the average weighted southern region farmgate milk price to close the season between $5.70 and $6.20 a kilogram of milk solids.
Rabobank’s report, released last week, said further upside to the Murray Goulburn $5.20/kg/MS price, this season, was limited “while the processing still needs to make a major turnaround”.